Peso drops on heightened US-Iran tensions

The peso weakened against the dollar on Wednesday on geopolitical concerns amid heightened tensions between the United States and Iran.

The local unit dropped by eight centavos to close at PHP 58.97 versus the greenback from its PHP 58.89 finish on Tuesday, data from the Bankers Association of the Philippines showed.

The local currency opened Wednesday’s trading session weaker at PHP 58.95 against the dollar. It moved within a tight range as its intraday best was at just PHP 58.94, while its worst showing was its closing level.

Dollars traded rose to USD 1.209 billion from USD 1.08 billion on Tuesday.

“The dollar-peso closed higher on risk-off mood after the US military reported it had shot down an Iranian drone which heightened concerns of geopolitical tensions,” a trader said by phone.

This caused global crude oil prices to spike, which weighed on the peso, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

For Thursday, the trader expects the peso to move between PHP 58.90 and PHP 59.10, while Mr. Ricafort sees it ranging from PHP 58.85 to PHP 59.05.

In the oil market, Brent crude futures rose 0.77% to USd 67.85 a barrel while US crude advanced 0.97% to USD 63.82 per barrel as recent events stoked concerns that talks aimed at de-escalating US-Iran tensions could be disrupted, Reuters reported.

The US military said on Tuesday it shot down an Iranian drone that “aggressively” approached the Abraham Lincoln aircraft carrier in the Arabian Sea.

A group of Iranian gunboats also approached a US-flagged tanker in the Strait of Hormuz north of Oman, maritime sources and a security consultancy said. OPEC members Saudi Arabia, Iran, the United Arab Emirates, Kuwait and Iraq export most of their crude via the strait, mainly to Asia. — A.M.C. Sy with Reuters