Oil shock, war fears pound peso
The Philippine peso slid to a fresh record low against the US dollar on Friday, capping a volatile week as fears of a prolonged war in the Middle East and continued disruptions in the crucial Strait of Hormuz roiled global markets.
The peso closed at 59.735 versus the greenback, weakening by 35 centavos from its previous finish.
The close set a new record low, surpassing the prior all-time closing low of 59.5 recorded on March 9.
During Friday’s session, the local currency also fell to an intraday low of 59.75, breaching its previous intraday record of 59.71.
This, as the prospect of higher-for-longer oil prices heightened risks for energy-importing economies like the Philippines and pushed investors toward safe-haven assets like the US dollar.
Trading on Friday was heavy, with total volume rising to $2.2 billion from $1.9 billion in the previous session.
The violence, now in its second week, escalated after the United States and Israel struck Iran.
Tehran’s new supreme leader, Mojtaba Khamenei, said the Strait of Hormuz— which carries about 20 percent of the world’s oil—should remain closed and that Iran would continue attacks on its Persian Gulf neighbors.
The remarks pushed oil prices back above $100 a barrel, rattling global markets and sending traders scrambling for safety.
“In the near term, the peso may trade with volatility, its movements driven mainly by oil prices, global dollar strength and geopolitical developments,” a trader said.
Another trader said the peso could extend its losses next week, especially as market expectations of further interest-rate cuts by the Federal Reserve fade amid renewed global inflation fears.
Fewer rate cuts stateside could reduce the appeal of local yields, which have already declined after the Bangko Sentral ng Pilipinas (BSP) cut its policy rate to a more than three-year low of 4.25 percent to support a sluggish economy.
Still, the trader said the central bank may step in if the peso’s slide becomes disorderly.
“The BSP could be expected to intervene around the 60-peso level,” the trader said.
Already, BSP Gov. Eli Remolona Jr. has warned that the central bank could reverse course and raise interest rates if global oil prices stay above $100 a barrel for an extended period and the US dollar continues its rally.
In a note, economists at ANZ Research said the conflict in the oil-rich region was a “stress test for Asia’s energy resilience.”
“Current policy actions address short-term stability but not structural risk,” they said. “Measures including price mitigation, export management and securing supply cannot fully offset prolonged disruptions, underscoring both the urgency and difficulty of accelerating energy transition and diversification in Asia.”
That said, Jonathan Ravelas, senior adviser at Reyes Tacandong & Co., expects continued pressure on the peso. “Near term, the currency is expected to trade within the 59.60 to 59.90 range, with downside support around 59.60 and resistance near 59.90,” he said.
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