Peso tumbles as Middle East peace talks hit deadlock

The peso tumbled against the dollar on Thursday due to fading hopes for a peace deal between the United States and Iran as both sides remain at an impasse.

The currency weakened by 16.3 centavos to close at PHP 61.343 versus the greenback from its PHP 61.18 finish on Wednesday, data from the Bankers Association of the Philippines’ website showed.

This was its worst close in two weeks or since it ended at PHP 61.56 on July 30.

The local unit opened Thursday’s session a shade lower at PHP 61.20 per dollar. Its intraday best was at PHP 61.18, while its weakest point was at PHP 61.44 against the greenback.

Dollars exchanged rose to USD 1.7 billion from USD 1.46 billion previously.

The peso slumped after US consumer inflation data came within market expectations, leading to a correction in the greenback amid continued uncertainty in the Middle East and higher oil prices, a trader said by phone.

The currency also tracked the Philippine stock market’s weakness as investor sentiment stays subdued amid economic growth risks and ahead of the start of Chinese “ghost month,” which usually means weak trading activity, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The Philippine Stock Exchange index fell by 1.23% or 78.39 points to close at 6,288.25 on Thursday, while the broader all shares index slipped by 0.77% or 26.76 points to end at 3,437.23

Philippine gross domestic product (GDP) growth slowed to 2.3% in the second quarter from 5.4% in the same period last year and 2.8% in the preceding quarter. This was the slowest expansion since the fourth quarter of 2009, excluding the pandemic.

For the first semester, GDP growth averaged 2.6%, below the government’s 3.5%-4.5% full-year target.

For Friday, the trader sees the peso moving between PHP 61.10 and PHP 61.50 against the dollar, while Mr. Ricafort expects it to range from PHP 61.25 to PHP 61.45.

Iran and the United States remain at loggerheads over efforts to agree a permanent end to the war in the Gulf, according to a senior Iranian source, who said there had been no progress in talks to revive the interim deal agreed in June and define a time frame to implement it, Reuters reported.

The comments came as US President Donald J. Trump issued yet another broadside against Iran’s leaders, dealing a further blow to hopes for a resolution to the crisis, following new attacks on shipping in the region on Tuesday.

The deal agreed in June declared an “immediate and permanent termination of military operations on all fronts,” but quickly unravelled, with Mr. Trump saying it was “over” on July 7 and Iran’s foreign ministry declaring it “suspended” a week later.

The US accuses Iran of failing to honor an agreement under the deal to reopen the vital Strait of Hormuz shipping route. Tehran says Washington has reneged on its commitments, including lifting a blockade of Iranian ports and releasing frozen Iranian assets.

Mr. Trump said on Wednesday that the US has “total control” over the Strait of Hormuz.

But the Persian Gulf Strait Authority, the body Iran set up to ‌manage the waterway, said it remains blocked and will not be reopened until Iran’s conditions are accepted.

Benchmark Brent crude futures have surged since the start of the war in February, hitting a peak of USD 126 a barrel, roughly 75% above prewar levels, with choppy trade reflecting concerns over disruptions to Gulf oil supplies and shifting signals on peace talks.

Oil prices rose but then steadied in volatile trading on Wednesday, after forecasters cut projections for 2026 oil demand. Brent crude futures were trading at ​around USD 88 a barrel and US West Texas Intermediate crude at around USD 83 a barrel. — Aaron Michael C. Sy with Reuters