THE PESO may trade sideways against the dollar this week ahead of the Bangko Sentral ng Pilipinas’ (BSP) policy meeting, with continued global market volatility stemming from the Middle East conflict likely to weigh on sentiment.

On Thursday, the currency gained 14.5 centavos to close at P61.67 against the greenback, up from Wednesday’s P61.815 finish, data from the Bankers Association of the Philippines’ website showed. Week on week, however, the local unit weakened by 22 centavos from its P61.45 close on Aug. 14.

Philippine financial markets were closed on Friday for Ninoy Aquino Day.

For this week, peso-dollar trading will likely be driven by developments in the Middle East conflict, a trader said in a phone interview. That sensitivity reflects the Philippines’ reliance on imported fuel, as well as the Middle East’s role as home to a large share of overseas Filipino workers whose remittances are among the economy’s biggest sources of dollar inflows.

Iran on Saturday denounced US plans to announce new sanctions that could further strain the Islamic Republic’s economy and affect its key trading partners, including China, Reuters reported.

After nearly six months of war since the US and Israel launched airstrikes against Iran on Feb. 28, the sides are no longer firing at each other but have also shown no sign of pursuing peace talks.

Oil shipments are at a virtual standstill in the Strait of Hormuz, the chokepoint through which roughly a fifth of the world’s oil trade normally passes, with Tehran threatening to strike any unauthorized oil tankers that try to pass through the vital waterway, and Iran’s economy is already under heavy pressure from sanctions.

US Treasury Secretary Scott Bessent is due to hold a press conference at 2 p.m. EDT (1800 GMT) on Monday after threatening “the toughest sanctions in history” on Iran.

Mr. Bessent has also urged China to cooperate with Washington. China buys more than 80% of Iran’s shipped oil, according to 2025 data from analytics firm Kpler. Beijing has called for diplomacy.

Iranian Foreign Ministry spokesperson Esmaeil Baghaei said on Saturday that the expected US announcement of new economic sanctions was an “assertion of extraterritorial sovereignty over every independent member state of the United Nations.”

The secretary of Iran’s Supreme National Security Council, Mohsen Rezaei, told state television that Tehran would target the interests of countries helping the United States.

US President Donald J. Trump, who has warned of economic consequences for any country providing “any type of lifeline to Iran,” said on Friday that Washington was observing “what happens” in the conflict.

While the US has effectively blockaded Iranian vessels in their ports, the Strait of Hormuz remained bottled up, with thousands of seafarers stranded on hundreds of vessels.

Mr. Trump has yet to achieve the objectives he set at the start of the war, including dismantling Iran’s nuclear program — the status of which remains uncertain because UN inspectors have been shut out since 2025 — and creating conditions for Iranians to overthrow their clerical rulers.

Meanwhile, the BSP Monetary Board’s policy meeting on Thursday, Aug. 27, where another rate hike is expected, will also be a key trading driver, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“A BSP hike would be supportive for the peso,” the trader said, as higher domestic interest rates tend to lift the yield appeal of peso-denominated assets relative to dollar holdings.

A BusinessWorld poll showed that 19 of 24 analysts expect the Monetary Board to raise the target reverse repurchase rate by 25 basis points (bps) for a third straight meeting this week as inflation remains elevated.

The rest expect the central bank to hold rates steady amid lingering uncertainties, especially as economic growth weakens.

The Monetary Board has raised benchmark rates by a cumulative 50 bps since April, bringing the policy rate to 4.75%.

BSP Governor Eli M. Remolona, Jr. said last week that the central bank is ready to adjust its monetary policy stance as needed to bring inflation back to target (the BSP aims to keep inflation within 2-4%) amid broadening price risks, especially with the Middle East conflict still unresolved.

However, weak Philippine economic growth somewhat eases the pressure on the central bank to take aggressive action.

Both the trader and Mr. Ricafort see the peso moving between P61.40 and P61.90 against the dollar this week. — A.M.C. Sy with Reuters