Peso climbs on Hormuz reopening hopes, BSP bets

The peso strengthened on Wednesday as market sentiment improved amid news on the possible reopening of the Strait of Hormuz that brought down global oil prices, and ahead of the Bangko Sentral ng Pilipinas’ (BSP) policy review.

The local unit climbed by 8.8 centavos to close at PHP 61.65 per dollar on Wednesday from its PHP 61.738 finish on Tuesday, data on the Bankers Association of the Philippines’ website showed.

The currency opened the session stronger at PHP 61.63 versus the greenback. It traded better than Tuesday’s close the entire day as it reached an intraday high of PHP 61.52, while its worst showing was at just PHP 61.675 against the greenback.

Dollars exchanged climbed to USD 1.901 billion from USD 1.57 billion.

“The peso gained on market optimism of a Hormuz deal between Iran and Oman, which is seen to settle the conflict in the Middle East,” a trader said in a Viber message.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said this renewed hopes of a resolution to the nearly six-month war in the Middle East, which pulled global oil prices down.

Iran said it had restarted talks with Oman to manage the Strait, as it faces heightened economic pressure from US President Donald J. Trump in the nearly six-month conflict that has roiled oil markets and stoked global inflationary worries, Reuters reported.

Brent crude futures fell for a third straight day on Wednesday, sliding more than 2% to USD 86.45 per barrel on the prospect of more supply coming through the Strait, which handled a fifth of the world’s traded oil before the war.

For Thursday, the trader said the peso could rise further versus the dollar amid the widely expected third straight BSP rate hike.

A BusinessWorld poll conducted last week showed 19 of 24 analysts expect another 25-basis-point (bp) increase at the Monetary Board’s fourth rate-setting meeting this year.

Since it began tightening in April, the Monetary Board has raised key borrowing costs by 50 bps to 4.75%.

BSP Governor Eli M. Remolona, Jr. has said their inflation fight is not yet over as recent data have not proven a sustained disinflation trend. Inflation stood at 5% as of July, well above the central bank’s 3% target.

However, economic growth weakening for a fourth straight quarter to a post-pandemic low of 2.3% in the second quarter could give them room to be less aggressive.

The trader sees the peso moving between PHP 61.50 and PHP 61.75 per dollar on Thursday, while Mr. Ricafort expects it to range from PHP 61.55 to PHP 61.75. — Katherine K. Chan