Peso weakens as oil prices rise

The peso declined against the dollar on Tuesday amid higher global oil prices due to the conflict in the Middle East and before the release of Philippine gross domestic product (GDP) data.

The local unit closed at PHP 56.401 per dollar on Tuesday, weakening by 13.1 centavos from its PHP 56.27 finish on Monday, Bankers Association of the Philippines data showed.

The peso opened Tuesday’s session slightly weaker at PHP 56.30 against the dollar. Its intraday best was at PHP 56.20, while its worst showing was at PHP 56.475 versus the greenback.

Dollars exchanged went up to USD 1.32 billion on Tuesday from USD 1.17 billion on Monday.

The peso corrected lower “as global crude oil prices hovered among two-month highs recently amid tensions at the Red Sea area that increased shipping costs and caused some shipping delays and also after the drone attack al-legedly by Iranian-back militias on a US base in Jordan,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The United States vowed to take “all necessary actions” to defend American forces after a drone attack killed three US troops in Jordan, Reuters reported.

US crude rose by 0.6% to USD 77.24 per barrel and Brent was at USD 82.78, up by 0.46% on the day.

“The peso weakened anew amid a potentially softer Eurozone GDP growth report tonight,” a trader said in an e-mail on Tuesday.

For Wednesday, the trader said the peso could recover against the dollar due to the release of Philippine GDP data for full-year 2023 and the fourth quarter.

“Stronger GDP data could support hawkish monetary policy stance as a matter of prudence amid higher global and local rice prices recently due to El Niño drought risks until the second quarter that could reduce palay output and could lead to some uptick in prices and overall inflation,” Mr. Ricafort said.

The trader expects the peso to move between PHP 56.25 and PHP 56.50 per dollar on Wednesday, while Mr. Ricafort sees it ranging from PHP 56.30 to PHP 56.50. — with Reuters