Fresh US-Iran strikes drag peso

The peso dropped versus the dollar on Wednesday following a fresh flareup in the Middle East conflict that puts the fragile ceasefire between the United States and Iran at risk.

The local unit declined by seven centavos to finish at PHP 61.505 against the greenback from PHP 61.435 on Tuesday, based on data on the Bankers Association of the Philippines’ website.

The currency began Wednesday’s session weaker at PHP 61.55 a dollar. It sank to as low as PHP 61.625 intraday, while its best showing was at PHP 61.47 versus the greenback.

Dollars traded dropped to USD 1.164 billion from USD 1.377 billion.

“The peso depreciated following reports of military skirmishes by the US along the Strait of Hormuz overnight, which drove renewed safe-haven demand for the greenback,” a trader said in a Viber message.

This led to slightly higher global crude oil prices, which also affected the exchange rate, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“Brent crude oil price went up by more than 2% to trade at USD 76 per barrel levels… after the US launched fresh airstrikes in Iran and revoked a waiver that allowed Iran to sell oil globally following attacks on ships in the Strait of Hormuz,” he said.

US President Donald J. Trump said an interim agreement to end the war with Iran was “over” on Wednesday after Tehran carried out new attacks on US bases in the Gulf, Reuters reported.

In a flareup of hostilities that pushed oil prices up to a two-week high, Iran said it had targeted US military sites in Bahrain and Kuwait after US forces struck Iranian targets in response to attacks on tankers in the Strait of Hormuz.

The attacks further undermined efforts to turn the interim ceasefire agreement that was reached last month into a permanent peace deal to end the war, which began with US-Israeli airstrikes on Iran on Feb. 28.

The dollar also hit fresh highs versus major currencies on reduced odds of a hike from the US Federal Reserve, Mr. Ricafort added.

For Thursday, the trader said potentially hawkish hints from minutes of the Fed’s latest meeting could cause the peso to weaken further.

Both the trader and Mr. Ricafort see the peso moving between PHP 61.40 and PHP 61.65 versus the dollar. — Bettina V. Roc with Reuters