Peso falls again after fresh US strikes on Iran

THE PESO fell versus the dollar on Tuesday after the United States’ latest attacks on Iran pushed up oil prices again and dampened market sentiment.

The currency dropped by 9.5 centavos to close at P61.56 a dollar from P61.465 on Monday, according to Bankers Association of the Philippines data posted on its website.

The local unit opened Tuesday’s session a shade stronger at P61.45 per dollar. Its intraday best was at P61.405 against the greenback, while its weakest showing was at P61.65.

Dollars traded slipped to $1.68 billion from $1.8 billion in the previous session.

The peso declined against the dollar on Tuesday after the US launched attacks on Iran, driving up global crude oil prices anew and dampening hopes of a peace deal, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“The dollar-peso closed higher on renewed risk off sentiment after the US attacked Iran in the Strait of Hormuz, which pushed oil prices higher,” a trader said in a phone interview.

Philippine financial markets are closed on Wednesday (May 27) for a regular holiday in observance of Eid’l Adha.

For Thursday, the trader said the peso could move between P61.35 and P61.75 against the dollar, with market players expected to continue tracking developments in the Middle East. Mr. Ricafort sees the currency ranging from P61.45 to P61.65.

The dollar steadied on Tuesday as investor hopes of an imminent deal to reopen the crucial Strait of Hormuz and end the Iran war were dented by fresh US attacks on Iranian targets and comments that reaching an agreement may take some time, Reuters reported.

The prospect of a peace deal had pushed oil prices below $100 a barrel, eased pressure on emerging-market currencies, and boosted risk sentiment slightly this week.

But comments from US Secretary of State Marco Rubio on Tuesday that negotiating a deal with Iran could “take a few days,” a day after US forces conducted what Washington called defensive strikes in southern Iran, tempered that market optimism.

Against a basket of currencies, the dollar was very slightly higher at 99.08 after falling 0.3% the previous day. Treasury yields fell sharply on Tuesday as US markets returned from a holiday, catching up on a drop in global bond yields on the anticipation of a peace deal.

Oil prices clawed back some of their losses at the start of trading on Tuesday on news of the US strikes. Brent crude futures rose 1.5% to $97.76 per barrel after dropping 7% on Monday.

Analysts don’t see energy prices returning to prewar levels any time soon, even with a near-term resolution, as supply chains will take time to normalize and that will keep inflation and rate concerns firmly in place. — A.M.C. Sy with Reuters