Peso sinks on ME war, Fed bets

The peso slumped versus the dollar on Monday amid reignited tensions in the Middle East (ME) and heightened expectations of a hawkish US Federal Reserve.

The currency fell by 22 centavos to close at PHP 61.69 versus the greenback from its PHP 61.47 finish on Friday, according to Bankers Association of the Philippines data posted on its website.

The local unit opened Monday’s session slightly weaker at PHP 61.495 per dollar. It posted an intraday high of PHP 61.48, while its worst showing was at PHP 61.735 against the greenback, inching near its record-low close of PHP 61.75.

Dollars traded dropped to USD 1.1 billion on Monday from USD 2.5 billion on Friday.

Fresh US-Iran tensions drove safe-haven demand for the greenback on Monday, a trader said in a phone interview.

“The dollar-peso closed higher amid stronger nonfarm payrolls last Friday, which reinforced hawkish Fed bets,” a trader added.

The peso was also dragged by data showing a continued decline in the country’s foreign exchange reserves, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The Philippines’ gross international reserves (GIR) stood at USD 103.974 billion at end-May, down 1.14% from the USD 105.177 billion it held a year ago, preliminary Bangko Sentral ng Pilipinas data showed.

This was the lowest GIR level seen since January 2025, when it stood at USD 103.271 billion. Month on month, it fell by 0.34% from the USD 104.328 billion at end-April.

For Tuesday, the trader sees the peso moving between PHP 61.50 and PHP 61.80 per dollar, while Mr. Ricafort expects it to range from PHP 61.55 to PHP 61.75.

The dollar traded around its highest in nearly two months on Monday after a blowout US jobs report prompted traders to ramp up bets on a US Federal Reserve rate rise this year, Reuters reported.

The dollar held the gains made on the back of Friday’s report that showed nonfarm payrolls increased by 172,000 jobs last ​month, which far exceeded estimates. The euro hovered around its lowest in around nine weeks at USD 1.1525, while the pound traded near three-week lows at USD 1.3344.

Prior to the release of the jobs report, traders were already growing more convinced of a Fed hike landing this year, as the global energy crisis tied to the Iran war threatens to stoke inflation.

The Federal Open Market Committee meets next week for the first time under new Chair Kevin Warsh, and right now, markets see a roughly 50% chance of a hike by September, meaning caution could temper any excessive dollar bullishness, analysts said.

Israel said it struck military targets in western and central Iran on Monday, even after US President Donald J. Trump reportedly told Israeli Prime Minister Benjamin Netanyahu to refrain from further attacks. As a result, the oil price jumped nearly 5%, which added a layer of nervousness for investors who were already grappling with a steep sell-off in high-flying tech stocks. — A.M.C. Sy with Reuters