Peso ends higher in cautious trade amid war, BSP rate bets

The peso strengthened versus the dollar on Monday in cautious trading as markets monitored developments between the United States and Iran and before the Bangko Sentral ng Pilipinas’ (BSP) policy meeting this week.

The local unit climbed by 6.5 centavos to close at PHP 59.97 against the greenback from its PHP 60.035 finish on Friday, data from the Bankers Association of the Philippines showed.

The currency opened Monday’s session stronger at PHP 59.97 per dollar. Its intraday best was at PHP 59.80, while its worst showing was at PHP 60.08 versus the greenback.

Dollars traded increased to USD 1.54 billion from USD 1.22 billion on Wednesday.

“The dollar-peso closed a little lower but remained rangebound amid uncertainties on the Strait of Hormuz and ahead of the Monetary Board meeting, resulting in cautious trading,” a trader said in a phone interview.

Hawkish signals from the BSP chief also supported the peso as traders look ahead to the Monetary Board’s policy review on Thursday (April 23), Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

For Tuesday, the trader sees the peso ranging from PHP 59.70 to PHP 60.20 per dollar, while Mr. Ricafort expects it to move between PHP 59.85 and PHP 60.05.

BSP Governor Eli M. Remolona, Jr. earlier told BusinessWorld that they have room to raise rates to temper growing inflation risks amid the Middle East conflict.

He added that second-round effects may emerge sooner than expected as the global oil shock is expected to spill over into domestic food and transport prices.

A BusinessWorld poll showed that 11 out of 19 analysts expect the Monetary Board to hike the target reverse repurchase rate by 25 basis points at this week’s meeting. This would bring the benchmark rate to 4.5% and mark the BSP’s first tightening move since October 2023.

Meanwhile, the US dollar rose to its highest level in a week against major currencies on Monday before paring gains as renewed US-Iran tensions and fading hopes for a Middle East peace deal sent investors toward safe havens, Reuters reported.

The United States said on Sunday that it had seized an Iranian cargo ship that tried to run its blockade, while Iran said it would retaliate, stoking fears about a resumption of hostilities. Tehran also said it would not participate in a second round of negotiations that the US had hoped to kick off before its two-week ceasefire with Iran expires on Tuesday.

The dollar index, which measures the US currency against six peers, recouped some of its recent losses to rise to its highest in a week at 98.47, before dipping to trade at 98.34. — Aaron Michael C. Sy with Reuters