Peso to move sideways vs dollar with Middle East developments in focus

THE PESO may trade sideways against the dollar this week as markets remain on edge amid the temporary ceasefire deal between the United States and Iran.

On Friday, the local unit closed at P59.97 against the dollar, weakening by 54 centavos from its P59.43 finish on Wednesday, Bankers Association of the Philippines data showed.

Week on week, however, the peso gained 19 centavos from its P60.16 finish on April 1.

The dollar edged higher on Friday due to worries over the fragile US-Iran ceasefire, with Israel’s attacks on Lebanon triggering safe-haven demand, a trader said in a phone interview.

The peso was also dragged lower by S&P Global Ratings’ downgrade of the Philippines’ credit rating outlook, Rizal Commercial Banking Corp, Chief Economist Michael L. Ricafort said in a Viber message.

The debt watcher cut the Philippines’ credit outlook to “stable” from “positive” as surging energy prices due to the Middle East conflict and a slowdown in infrastructure spending could worsen its external position.

Still, it said it expects the economy to grow steadily, which could help keep its fiscal position healthy.

For this week, the trader said the market will continue to watch developments on the ceasefire, noting that the peso could weaken back to the P60 level if tensions rise anew but remain at the P59 range if the situation stays benign.

The trader sees the peso ranging from P59.70 to P60.30 per dollar this week, while Mr. Ricafort expects it to move between P59.70 and P60.20.

The US and Iran failed to reach an agreement to end their war despite lengthy talks that concluded on Sunday in the Pakistani capital Islamabad, jeopardizing a fragile ceasefire, Reuters reported.

Each side blamed the other for the failure of the 21-hour-long negotiations to end fighting that has killed thousands and sent global oil prices soaring since it began over six weeks ago.

The talks in Islamabad, after a ceasefire earlier in the week, were the first direct US-Iranian meeting in more than a decade and the highest-level discussions since the 1979 Islamic Revolution.

Iran’s semi-official Tasnim news agency said that “excessive” US demands had hindered reaching an agreement. Other Iranian media said there was agreement on a number of issues but that the Strait of Hormuz and Iran’s nuclear program were the main points of difference.

“It is imperative that the parties continue to uphold their commitment to ceasefire,” Pakistan’s Foreign Minister Ishaq Dar said in a statement after the talks. The two sides agreed on Tuesday to a two-week ceasefire in an attempt to wind down a war that began on Feb. 28 with air strikes by the US and Israel on Iran.

Despite the differences in Islamabad, three supertankers fully laden with oil passed through the Strait of Hormuz on Saturday, shipping data showed, in what appeared to be the first vessels to exit the Gulf since the US-Iran ceasefire deal. — Aaron Michael C. Sy with Reuters