Peso sheds gains on latest US-Iran flare-up

THE PESO weakened against the dollar on Wednesday, erasing most gains notched in the previous day due to renewed tensions between the United States and Iran.

The currency declined by seven centavos to close at P61.745 versus the greenback from P61.675 on Tuesday, according to Bankers Association of the Philippines data posted on its website.

The local unit opened Wednesday’s session nearly flat at P61.68 per dollar. It again traded within a narrow range, logging an intraday high of P61.655 and a trough of P61.75 against the greenback, which is its record-low finish.

Dollars traded rose to $1.89 billion on Wednesday from $1.299 billion on Tuesday.

“Renewed US-Iran tensions lifted the pair to close higher amid flight to safe havens,” a trader said by phone.

Higher global crude oil prices due to the escalating Middle East conflict dragged the peso lower, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

For Thursday, the trader said the peso could test new record lows and move between P61.50 and P61.90, while Mr. Ricafort sees it ranging from P61.55 to P61.75.

Renewed strength in the dollar pushed the Japanese yen back to the key ¥160 level on Wednesday, prompting verbal warnings from authorities and keeping traders on alert for intervention, as fresh Gulf hostilities bolstered demand for the greenback, Reuters reported.

The US said Iran launched ballistic missiles toward regional neighbors, but all failed to hit targets, and that US forces conducted strikes on Qeshm Island in response.

Diplomatic talks between Iran and the United States remain at a stalemate, keeping the market mood somber. The dollar has tended to rally during flare-ups of the conflict, underpinned by safe-haven demand and the US’ lower sensitivity to energy price shocks; the yen tends to weaken as oil rises, given Japan’s reliance on imported energy.

The yen on Wednesday fell to the closely watched ¥160-per-dollar level, where authorities have previously intervened. That erased its gains made in the wake of Tokyo’s ¥11.7-trillion ($73-billion) intervention a month ago to shore up the ailing currency.

Prime Minister Sanae Takaichi said later that authorities stood ready to respond to exchange rate moves as needed.

The dollar was last a touch softer on the day at ¥159.66 following Ms. Takaichi’s comments.

In the broader market, trading in currencies remained in tight ranges.

The euro eased 0.1% to $1.1620, while sterling was flat at $1.3460.

The prolonged war in the Middle East and persistently high energy prices have left investors ramping up bets of policy tightening across major central banks this year, a sea change from the rate cuts that were priced in prior to the conflict.

Against a basket of currencies, the dollar was steady at 99.29. — Aaron Michael C. Sy with Reuters