Peso back at PHP 60 level as US, Iran reach deal

The peso jumped back to the PHP 60-a-dollar level on Monday for the first time in over a month after the United States said it reached an interim peace deal with Iran.

The currency surged by 87 centavos to close at PHP 60.48 versus the greenback from PHP 61.35 on Thursday last week, based on Bankers Association of the Philippines data posted on its website. This was its strongest finish in more than a month or since it ended at PHP 60.42 on May 7.

The local unit opened Monday’s session sharply stronger at PHP 60.60 per dollar. It traded above Thursday’s close the entire day as it recorded an intraday high of PHP 60.445, while its low was at just PHP 60.73 against the greenback.

Dollars traded fell to USD 1.68 billion on Monday from USD 2.27 billion on Thursday.

The peso rose sharply against the dollar on Monday after the US and Iran agreed to an interim deal to end the war, which would potentially lead to the reopening of the Strait of Hormuz, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“The dollar-peso closed lower on reports that the US and Iran have reached a peace deal, with oil dropping down to USD 83 per barrel levels and tracking dollar weakness,” a trader likewise said in a phone interview.

For Tuesday, the trader sees the peso moving between PHP 60.30 and PHP 60.60 per dollar, while Mr. Ricafort expects it to range from PHP 60.35 to PHP 60.65.

The US dollar traded around a 10-day low against other major currencies on Monday as a preliminary agreement to end the war between the US and Iran sent oil prices tumbling and boosted demand for riskier assets, Reuters reported.

US and Iranian officials said on Sunday they had agreed on a framework for a deal to end their war, halt the US blockade of Iran and reopen the Strait of Hormuz.

The memorandum of understanding is scheduled to be officially signed on Friday in Switzerland, but caution still lingered as markets awaited more details and as the fate of Iran’s nuclear program was left for further negotiations.

Oil prices slumped, with Brent crude futures down around 5% to USD 82.9 a barrel.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, was little changed at 99.52, hovering around its lowest since June 5.

The Japanese yen was broadly steady at JPY 160.10 per dollar, continuing to hover around the JPY 160 level widely seen as a line in the sand for potential official intervention.

Major central banks, including the US Federal Reserve, the Bank of Japan, the Bank of England and the Reserve Bank of Australia, will deliver rate decisions this week, with markets focused on whether prospects for a peace deal will ease their inflation concerns and influence the current tightening trajectory.

The Federal Reserve is widely expected to hold rates in the current range of 3.5%-3.75% on Wednesday, but all eyes will be on the policy statement and press conference for what the new chair, Kevin Warsh, signals. — A.M.C. Sy with Reuters