Peso rises further on peace deal hopes
Key Takeaways
- •The peso closed at P61.614 per dollar on Tuesday, stronger by 6.1 centavos from the previous day.
- •Falling oil prices and hopes of reduced U.S.-Iran tensions supported the peso's recovery.
- •BSP Governor Eli Remolona said a 50-basis-point rate move is possible, but the odds remain small.
- •Remolona said the central bank intervened only minimally during the peso’s recent slide and would not try to defend the currency aggressively.
- •The peso’s earlier record low was linked to higher oil prices and broader dollar strength, which can raise import costs and inflation.
THE PESO strengthened further against the dollar on Tuesday as global oil prices continued to fall on hopes of an end to the Middle East conflict, while the Philippine central bank chief said more aggressive monetary action remains unlikely despite ongoing global market volatility.
The currency climbed by 6.1 centavos to close at P61.614 against the greenback from its P61.675 finish on Monday, based on data from the Bankers Association of the Philippines’ website.
The local unit opened Tuesday’s session slightly weaker at P61.70 per dollar. It touched a high of P61.60 and an intraday low of P61.76 against the greenback.
Dollars traded rose to $1.16 billion from $990.68 million previously.
“The peso appreciated on increasing prospects of a diplomatic resolution of tensions between the US and Iran after favorable pronouncements from both governments,” a trader said in an e-mail.
The peso also found support from the latest rate hike and currency intervention signals from Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr., Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
Mr. Remolona said the central bank could consider a larger 50-basis-point (bp) move amid emerging threats to inflation, but the chance of such a move remains small.
He added that the peso’s recent slump to a new record low could stoke inflation by raising import costs, underscoring how currency swings can feed into prices in an economy that relies on imported fuel and other goods. Soaring oil prices amid the latest flareup in Middle East tensions last week dragged the peso to a fresh low of P61.847 against the greenback on Friday.
He noted, however, that the decline was also driven by the broad weakening of most currencies against the dollar due to a flight to safety following developments in the Gulf region.
Mr. Remolona said the BSP intervened minimally during the peso’s latest slide to smooth volatility, but added that defending the currency against a strong dollar would be futile and would only deplete reserves.
For Wednesday, the trader sees the peso moving between P61.45 and P61.70 per dollar, likely supported by lower global crude oil prices, while Mr. Ricafort expects it to trade from P61.55 to P61.75. — A.M.C. Sy