Peso slumps as oil prices rise on demand hopes

THE PESO weakened against the dollar on Tuesday due to rising oil prices following China’s easing of its coronavirus disease 2019 (COVID-19) restrictions.

The local currency closed at PHP 55.90 versus the greenback, slumping by 75 centavos from Friday’s PHP 55.15 close, data from the Bankers Association of the Philippines showed.

The peso opened the session at PHP 55.15 per dollar, which was also its best showing intraday. Meanwhile, it dropped to as low as PHP 55.93 against the greenback.

Dollars traded dropped to USD 813.27 million from USD 1.02 billion on Friday.

The market was closed on Monday due to a special non-working holiday.

A trader said in a Viber message that the local currency weakened significantly due the rise in global crude oil prices as China, one of the world’s largest importers of fuel, eased COVID-19 restrictions.

Oil prices rose to three-week highs on Tuesday as China’s latest easing of COVID-19 restrictions spurred fuel demand hopes, while concerns that winter storms across the United States are affecting energy production continued to support prices, Reuters reported.

Brent crude was up 52 cents or 0.6% at USD 84.44 a barrel by 0712 GMT, while US West Texas Intermediate (WTI) crude was at USD 80.04 a barrel, up 48 cents or 0.6%. They hit their highest since Dec. 5 earlier in the session.

On Friday, Brent rose 3.6%, while WTI gained 2.7%, as they recorded their biggest weekly gains since October.

China will end its quarantine requirements for inbound travelers starting on Jan. 8, the National Health Commission said on Monday, dropping a rule in place since the start of the pandemic three years ago. That raised optimism of higher demand from the top crude oil importer.

The greenback softened after China said it would drop its quarantine rule. A weaker dollar makes oil cheaper for holders of other currencies.

Meanwhile, another trader said that the peso weakened amid demand for dollars.

“Usually every [middle] or end [of the] month, corporates are net buyers of US dollars,” the second trader said.

For Wednesday, first trader sees the peso moving between PHP 55.75 and PHP 55.60 against the greenback, while the second trader gave a wider forecast range of PHP 55.60 to PHP 55.60 per dollar. — A.M.C. Sy with Reuters