Peso may fall as US, Israel attack Iran

THE PESO could depreciate against the dollar in the coming days amid mounting geopolitical risks as the United States and Israel attacked Iran over the weekend.

On Friday, the local unit closed at P57.665 per dollar, weakening by 5.7 centavos from its P57.608 finish on Thursday, data from the Bankers Association of the Philippines showed.

Week on week, however, the peso jumped by 48.5 centavos from its P58.15 close on Feb. 20.

“The dollar-peso traded higher on cautious positioning ahead of the release of US PPI (producer price index), which will clarify the US Federal Reserve’s policy trajectory,” a trader said by phone on Friday.

The peso declined as Chicago Fed President Austan Goolsbee signaled more rate cuts this year, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The US dollar rose on Friday after hotter-than-expected producer price data for January and on concerns about rising tensions between the United States and Iran, Reuters reported.

The PPI for final demand rose 0.5% last month after advancing by a downwardly revised 0.4% in December. Economists polled by Reuters had forecast the PPI gaining 0.3% after a previously reported 0.5% increase in December.

For this week, the trader said the peso could be pressured by the faster-than-expected US PPI data.

The trader added that players will await the release of February inflation data as this could provide clues on the Bangko Sentral ng Pilipinas’ policy path.

Meanwhile, Mr. Ricafort said the peso could be weighed down inflation concerns due to higher oil prices amid potential supply disruptions as the US and Israel launched air strikes on Iran.

The trader sees the peso moving between P57.40 and P57.85 per dollar this week, while Mr. Ricafort expects it to range from P57.50 to P58.

Israel said it launched another wave of strikes on Iran on Sunday, as Iranians grappled with uncertainty after the killing of their supreme leader in US and Israeli attacks that threaten to destabilize the wider Middle East, Reuters reported.

Hours after both nations said an airstrike killed Ayatollah Ali Khamenei in the most ambitious series of attacks on Iran in decades, the country’s state media confirmed the 86-year-old leader’s death on Saturday.

Iran’s armed forces would soon retaliate again with their biggest offensive against US bases and Israel, Islamic Revolutionary Guard Corps vowed in a statement on Sunday.

On Saturday, Tehran warned that it had closed the Strait of Hormuz, the narrow conduit for about a fifth of global oil consumption, raising expectations of a sharp jump in oil prices. — Aaron Michael C. Sy with Reuters