Peso weakens versus the dollar due to Russia-Ukraine tensions
THE PESO retreated versus the greenback on Monday amid cautious sentiment caused by the ongoing rift between Russia and Ukraine.
The local unit closed at P51.37 per dollar on Monday, depreciating by three centavos from its P51.34 finish on Friday, data from the Bankers Association of the Philippines showed.
The peso opened Monday’s session weaker at P51.38 versus the dollar. Its weakest showing was at P51.405, while its intraday best was at P51.32 against the greenback.
Dollars exchanged dropped to $627 million on Monday from $913.88 million on Friday.
“The peso weakened amid growing geopolitical concerns between Russia and Ukraine over the weekend,” a trader said in an e-mail.
The United States and Europe have warned their citizens to exit Ukraine amid a brewing possibility of Russian invasion which may include an air assault, Reuters reported.
US officials have said Moscow may invade Ukraine before the end of the Winter Olympics on Feb. 20 and may target Kyiv and other cities.
Ukraine on Sunday told airlines to avoid the open waters of the Black Sea from Monday to Saturday while Russian forces conduct their naval exercises.
The dollar and safe-haven currencies held firm and riskier ones struggled for traction on Monday, with traders on edge about the prospect of war in Europe and unsettled by soaring inflation.
The risk of war in Ukraine pushed the euro down on Friday and it was nursing losses at $1.1346 on Monday, well below last week’s top of $1.1495.
The Australian and New Zealand dollars were also pinned below last week’s levels and the Russian rouble was struggling after the spectre of sanctions sparked its sharpest fall in nearly two years on Friday.
The safe-haven yen has climbed to 115.53 yen from a five-week low of 116.34 last week.
The Russia-Ukraine flashpoint adds to stress already evident in markets’ volatile response to hotter-than-expected US inflation data last week, which unleashed bets on the Federal Reserve lifting rates more than 160 basis points before the end of the year.
The dollar index crept up to 96.059 in the Asia session. Analysts see the euro, which dropped 1.2% on the yen on Friday, and oil importers’ currencies as most at risk from conflict in Ukraine. Oil prices have surged.
Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort in a Viber message said the peso only moved sideways as the market was waiting for remittance data.
Based on the central bank’s advance release calendar, December and full-year 2021 cash remittances data will be out this Tuesday.
Remittance inflows in November rose by 5.1% year on year to $2.502 billion. This caused inflows in the 11 months to November to increase by 5.2% to $28.43 billion.
The Bangko Sentral ng Pilipinas had forecast cash remittances to have grown by 6% in 2021. It expects a 4% rise this year.
For Tuesday, Mr. Ricafort gave a forecast range of P51.30 to P51.45, while the trader expects the local unit to move within P51.25 to P51.50. — LWTN with Reuters
