Peso stays at all-time low as Mideast war escalates

The peso was steady against the dollar on Thursday, staying at its all-time low, as market players continued to monitor the situation in the Middle East as this could affect global oil prices and inflation expectations.

The currency closed at PHP 61.75 versus the greenback on Thursday, flat from Wednesday’s finish, based on data on the Bankers Association of the Philippines’ website.

The peso opened Thursday’s session just a shade stronger at PHP 61.74 versus the greenback. It moved within a very narrow range as its intraday high was at PHP 61.72, while its weakest showing was its closing value of PHP 61.75.

Dollars traded went up to USD 1.532 billion from USD 1.269 billion previously.

“The dollar-peso closed flat and traded within a tight range as players waited for stronger catalysts,” a trader said by phone.

The trader said markets are on wait-and-see mode regarding developments in the Middle East.

The peso was unchanged on Thursday even as surging global crude oil prices heightened expectations of a US Federal Reserve rate hike, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

This was likely due to intervention from the Bangko Sentral ng Pilipinas (BSP) to smoothen market volatility, he said.

The trader added that the peso could have been dragged by the nearing import season, which supports dollar demand.

The peso could breach the PHP 61.75 support and hit new lows if global prices reach USD 120 a barrel, the trader said, adding that this could prompt the BSP to intervene.

For Friday, the trader sees the peso moving at the same range of PHP 61.72 to PHP 61.75 per dollar, while Mr. Ricafort said it could trade between PHP 61.60 and PHP 61.80.

Oil prices hit their highest in more than a month on Thursday, rising for a fifth day as escalating hostilities between the United States and Iran stoked fears of supply disruptions across oil transit routes, Reuters reported.

Brent crude futures were up USD 3.80 or 4% at USD 97.87 a barrel by 0744 GMT for their highest since June 3. The US West Texas Intermediate crude climbed USD 2.80 or 3.2% at USD 89.63 after touching its highest since June 11.

Iran’s Revolutionary Guards said an oil tanker caught fire after an explosion while attempting to follow a mined route in the southern area of the Strait of Hormuz near the coast of Oman and that two others had turned back.

The Guards said the strait was under their control and “completely closed” while US actions continued in the region, warning that no tanker would be allowed to enter or leave without coordination with Iran.

The dollar edged lower against the euro ahead of the European Central Bank’s policy meeting on Thursday and reached a fresh 40-year high versus the yen, as investors remained focused on the escalating conflict in the Middle East.

The greenback has found support as markets rein in expectations for US rate cuts, with the American economy’s lower vulnerability to energy shocks reinforcing demand for the greenback at the expense of the euro and the yen.

The dollar index, which measures the dollar against a basket of currencies including the euro and the yen, eased 0.08% to 101.06.

The euro was last up 0.09% at USD 1.1423. — Aaron Michael C. Sy with Reuters