Peso strengthens to PHP 59.52 on easing oil prices

The Philippine peso strengthened against the dollar on Wednesday as oil prices eased and market optimism improved after reports that tankers had successfully moved through the Strait of Hormuz.

It closed at PHP 59.52, up 28 centavos from Tuesday’s PHP 59.80, according to Bankers Association of the Philippines (BAP) data posted on its website.

The peso opened at PHP 59.68, its weakest level of the day, before rising to a high of PHP 59.46. Dollar turnover slowed to USD 1.777 billion from USD 1.88 billion a day earlier.

“The peso rebounded amid increasing market optimism that more tankers have been able to transit through the Strait of Hormuz,” a trader said in an e-mailed reply to questions.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said the dollar’s retreat and softer crude prices supported the local currency.

Reports indicated that US and allied efforts had allowed limited oil shipments to resume through the key waterway, alleviating concerns over supply disruptions amid the Middle East war.

Lower oil prices reduce inflationary pressures, easing the market’s demand for dollars.

The peso also benefited from hawkish signals from the government’s representative to the Bangko Sentral ng Pilipinas (BSP) Monetary Board.

Finance Secretary and Monetary Board member Frederick D. Go said elevated oil prices could prompt a rate increase at the central bank’s April 23 meeting.

“If the price of oil continues to persist at elevated levels, it is most likely that the Monetary Board will consider tightening in the next meeting,” he told Bloomberg TV on Tuesday.

The BSP has cut borrowing costs by 225 basis points (bps) since August 2024, bringing the policy rate to an over three-year low of 4.25%.

The central bank last reduced rates by 25 bps in February, its sixth straight cut as it worked to restore confidence following the flood control corruption scandal.

Traders said the peso might face mixed pressure from potential hawkish signals from the US Federal Reserve, keeping volatility elevated.

Both Mr. Ricafort and the trader expect the peso to trade from PHP 59.40 to PHP 59.65 against the dollar on Thursday.

The dollar has strengthened overall since the US and Israel attacked Iran almost three weeks ago, reaching a 10-month high late last week as the conflict and rising oil prices drove investors into safe-haven US assets.

With no sign of de-escalation, Brent futures prices have settled above USD 100 a barrel for four consecutive sessions, though prices dipped on Wednesday after Iraqi and Kurdish authorities agreed to resume oil exports via Turkey’s Ceyhan port.

“With the rise in crude oil prices appearing to pause for the moment, it’s not as though conditions have improved dramatically, but for now, markets across the board seem to be recovering somewhat,” said Hirofumi Suzuki, chief foreign exchange strategist at Sumitomo Mitsui Banking Corp.

The US Federal Reserve will announce its policy decision on Wednesday, with the European Central Bank (ECB), Bank of England and Bank of Japan following a day later.

They are all widely expected to maintain interest rates but traders will look for clues on where borrowing costs are heading amid a potential inflationary shock from the Middle East war.

Money markets broadly expect the Fed to cut rates once this year, compared with the two reductions priced in before the conflict.

“The focus will very much be on the potential implications on inflation stemming from the conflict in the Middle East,” Derek Halpenny, a senior currency analyst at MUFG, said of the Fed’s decision.

He added: “We would be surprised to see any big rates or foreign exchange moves this evening given the likelihood of a balanced communication with no strong signals.”

The ECB is expected to raise interest rates in 2026, reversing expectations in February for the possibility of a further cut. — Aaron Michael C. Sy with Reuters