Peso may drop vs dollar on rising oil prices, war in Ukraine
THE PESO may depreciate versus the greenback this week as fuel prices climbed and as the war in Ukraine rages on.
The local unit ended trading at P52.03 per dollar on Wednesday, gaining seven centavos from its P52.10 close on Tuesday, based on Bankers Association of the Philippines data.
However, it depreciated by 44 centavos from its P51.59 finish on April 8.
Philippine financial markets were closed from April 14 to 15 in observance of Maundy Thursday and Good Friday.
A trader attributed the peso’s appreciation compared with its Tuesday’s finish to remittance flows for the holidays.
Meanwhile, the peso depreciated from its close a week earlier due to investors pricing in aggressive hikes from the US Federal Reserve this year, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said.
A Reuters poll last week showed analysts expect the Fed to raise rates by 50 basis points each for its May and June review to respond to runaway inflation. These analysts also expect a 40% probability of recession by 2023.
“It’s going to take time for us to appreciate the recent burst of relative prices and how long they’re going to be with us,” Chicago Fed President Charles Evans said last week.
For this week, peso-dollar trading will be guided by market sentiment on oil prices, the trader said.
Oil prices posted weekly gains by Friday as the market priced in supply constraints and the possibility of a ban on Russian oil from the European Union as well as the impact of lockdowns in China on fuel demand.
Meanwhile, Mr. Asuncion said investors will likely remain cautious as the Russia-Ukraine war stretches on.
Russia on Friday warned the US to stop its measures in arming Ukraine as this will have “unpredictable consequences.”
At a briefing on Tuesday, Russian President Vladimir Putin said their peace talks with Ukraine had hit a dead end. He said Kyiv derailed peace talks by what he said were fake claims about war crimes committed by Russian soldiers and by demand security guarantees to cover the whole of Ukraine.
For this week, Mr. Asuncion gave a forecast range of P51.90 to P52.30, while the trader expects a wider P51.80-to-P52.50-per-dollar band. — Luz Wendy T. Noble with Reuters
