Peso drops again as Middle East war continues
THE PESO dropped back to the P59 level against the dollar on Wednesday as uncertainty over the Middle East war weighed on sentiment.
The local unit dropped by 27.4 centavos to close at P59.17 against the greenback from its P58.896 finish on Tuesday, data from the Bankers Association of the Philippines showed.
The peso opened Wednesday’s trading session stronger at P58.888 per dollar. It climbed to a high of P58.77 but failed to hold on to its gains, closing at its intraday low.
Dollars traded edged up to $2.057 billion from $2.027 billion on Tuesday.
“The peso reverted above the P59 level on renewed safe-haven demand as military tensions between Iran and the US intensified along the crucial Strait of Hormuz,” a trader said in an e-mail.
For Thursday, the peso could recover ahead of a potentially softer US consumer inflation report overnight.
The trader sees the peso moving between P59 and P59.25 per dollar on Thursday.
The dollar staged a rebound after an early wobble on Wednesday as fears of escalation in the Middle East war kept risk appetite in check and prompted traders to seek refuge in the safe-haven currency, Reuters reported.
While any indication of a swift resolution to the US-Israel war with Iran has tempered the currency’s gains, conflicting signals from Washington and Tehran left traders without a clear direction.
Earlier this week, US President Donald J. Trump hinted that the war could end sooner than he had initially suggested, prompting a rebound in risk assets.
Iran, however, has continued to disrupt oil shipments through the Strait of Hormuz, defying Trump and drawing Washington’s ire.
Oil prices recovered on Wednesday after dropping earlier in the session, as doubts emerged over whether the International Energy Agency’s reported plan for a reserve release would be enough to offset a supply shock.
The yen was at 158.38 per US dollar, weakening 0.2%. The dollar index, which measures the US unit against six other rivals, was flat at 98.96.
As the conflict stretched into its 12th day, the US and Israel traded air strikes with Iran’s military across the Middle East. The besieged Tehran government warned its state security forces were ready with “fingers on the trigger” to confront any revival of anti-government protests.
The fast-evolving developments have left traders grappling with how to best price the risk.
A key focus for the market will also be US inflation data for February later on Wednesday. It is expected to show core consumer prices rose 0.2% during the month while headline prices were up 0.3%, according to economists polled by Reuters. — A.M.C. Sy with Reuters
