Peso slips as markets weigh ME developments

The peso dropped against the dollar on Thursday after oil prices rose anew as tensions flared between the United States and Iran.

The currency slipped by 3.5 centavos to close at PHP 61.595 versus the greenback from PHP 61.56 on Tuesday, according to Bankers Association of the Philippines data posted on its website.

The local unit opened Thursday’s session flat at PHP 61.56 per dollar. Its intraday high was at PHP 61.55, while its worst showing was at PHP 61.71, which it hit in the afternoon session.

Dollars traded went down to USD 1.11 billion from USD 1.68 billion.

“The dollar-peso closed a tad higher, but moved mostly sideways amid conflicting developments in the US-Iran peace talks,” a trader said by phone, noting that the mixed signals led to lower trading volume.

After trading rangebound in the morning, the local currency slid later in the day after US President Donald J. Trump said he is unsatisfied with the negotiations to end the war in the Middle East (ME), the trader added, but broad market optimism provided support for the peso before the market’s close.

Hawkish comments from Minneapolis Federal Reserve President Neel Kashkari, Fed Vice Chair Philip Jefferson, and Fed Governor Lisa Cook also weakened the peso, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

For Friday, the trader sees the peso moving between PHP 61.45 and PHP 61.75 per dollar, while Mr. Ricafort expects it to range from PHP 61.50 to PHP 61.70.

The US dollar was slightly higher on Thursday, after touching its strongest level since early April, as doubts grew over prospects of a deal to reopen the Strait of Hormuz and focus shifted to possible US interest rate hikes, Reuters reported.

Iran’s Revolutionary Guard targeted a US airbase on Thursday, hours after Mr. Trump rejected a report he was close to a compromise deal with Tehran.

The dollar surged in March after Iran’s effective closure of the Strait of Hormuz sent oil prices higher, hitting importers such as Japan and the euro zone and boosting safe-haven demand for the greenback.

It fell after Mr. Trump announced a two-week ceasefire on April 7, before recovering in May as doubts over a lasting deal grew.

Investors are also assessing the US Federal Reserve’s interest rate outlook ahead of economic data later in the session.

Oil prices rose more than 2% on Thursday after dropping over 5% the previous day, as Iran’s Revolutionary Guards said they targeted a US airbase in response to a US attack in the port city of Bandar Abbas.

The dollar index, a gauge of its value relative to a basket of major foreign currencies, was up 0.11% at 99.33, after touching 99.546 in Asian trade, its highest since April 7. — Aaron Michael C. Sy with Reuters