Peso sinks on safe-haven dollar demand

The peso sank near the PHP 57 level on Monday due to safe-haven demand for the dollar amid conflict in the Middle East.

The local currency closed at PHP 56.95 versus the dollar on Monday, sinking by 33 centavos from Friday’s PHP 56.62 finish, data from the Bankers Association of the Philippines’ website showed.

The local unit opened Monday’s session weaker at PHP 56.75 per dollar, which was also its intraday best. Meanwhile, its worst showing was at PHP 56.98 against the greenback.

Dollars traded went up to USD 1.25 billion on Monday from  USD 1.08 billion on Friday.

“The peso weakened significantly on safe-haven demand after the breakout of the Israeli-Palestinian conflict over the weekend,” a trader said in an e-mail.

The peso dropped as the conflict caused global crude oil prices to rise, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Israel pounded the Palestinian enclave of Gaza on Sunday, killing hundreds of people in retaliation for one of the bloodiest attacks in its history when Islamist group Hamas killed 700 Israelis and abducted dozens more, Reuters reported.

The danger of disruptions to supply was enough to drive Brent up USD 3.14 to USD 87.72 a barrel, while US crude climbed USD 3.28 to USD 86.07 per barrel.

The dollar was generally stronger on Monday on safe-haven demand due to the conflict, Mr. Ricafort said.

The dollar index was last 0.33% higher at 106.57.

For Tuesday, the trader said the peso could recover due to profit taking.

The trader sees the peso moving between PHP 56.75 and PHP 56.95 per dollar on Tuesday, while Mr. Ricafort expects it to trade from PHP 56.78 to PHP 56.98. — AMCS with Reuters