Peso strengthens as markets stay hopeful on US-Iran deal

THE PESO appreciated against the dollar on Thursday after the United States again signaled a possible end to the Middle East conflict.

The currency closed at P61.581 versus the dollar, gaining 15.9 centavos from its P61.74 finish on Wednesday, according to Bankers Association of the Philippines data posted on its website.

The local unit opened Thursday’s session sharply stronger at P61.50 per dollar. Its intraday best was at P61.45 against the greenback, while its weakest showing was at P61.665.

Dollars traded increased to $1.58 billion from $1.54 billion in the previous session.

“The peso appreciated after US President [Donald J.] Trump hinted about an impending end to the US-Iran conflict following his favorable remarks on the Iranian authorities in relation to their diplomatic talks,” a trader said in an e-mail.

The currency was also supported by the downward correction in global crude oil prices following Mr. Trump’s remarks, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

For Friday, the trader said the peso could continue to strengthen amid market optimism over an eventual resumption of oil trade along the Strait of Hormuz.

The trader sees the peso moving between P61.45 and P61.70 against the dollar on Friday, while Mr. Ricafort expects it to move between P61.45 and P61.65.

The US dollar firmed on Thursday but stayed below a six-week peak as hopes that Washington was nearing a deal with Tehran to end the war in the Middle East capped further rises, Reuters reported.

Mr. Trump on Wednesday said negotiations with Tehran were in the final stages, while also warning of further attacks if Iran does not agree to a deal.

The dollar, often a safe haven for investors, firmed 0.1% against the yen to ¥159.060 after falling for the first time in eight sessions against the yen on Wednesday.

Bank of Japan policy board member Junko Koeda added a measure of support for the yen with hawkish comments on Thursday, saying in a speech that the central bank needs to continue to raise rates with underlying inflation already around a 2% target.

The euro was 0.2% down at $1.160050, after dipping on Wednesday to its weakest level since April 7 at $1.1583 before bouncing back.

The dollar index, which measures the currency against the euro, yen and four other rivals, rose 0.2% to 99.295, down from a peak of 99.472 on Wednesday, the strongest level since April 7.

“The ‘safe haven’ flows reversed because of positive news about the Iran war,” wrote Joseph Capurso, head of FX at Commonwealth Bank of Australia, in a client note.

At the same time, “while the US has domestic political incentives to seek peace, we would not be surprised if President Trump chooses military escalation to gain leverage in negotiations,” he said.

Market focus has been on the potential inflationary impact of higher energy prices as the Strait of Hormuz remains largely closed to shipping.

In a note, Commerzbank FX analysts said many central banks may label the inflation shock as transitory should the Strait open in the next few days, but this would be incorrect as it does not take into account loss of purchasing power.

“Consequently, currencies are likely to benefit in countries where the central bank is slower to speak of transitory price spikes but may nevertheless tighten monetary policy,” they wrote.

Notes from the Federal Reserve’s April meeting, published on Wednesday, revealed officials’ intensifying concerns about inflation, with a growing number open to the possibility that they may need to raise interest rates.

Elsewhere, the Australian dollar declined following a surprise rise in the unemployment rate to the highest since 2021, which reduced the case for higher interest rates.

Bitcoin softened a fraction to around $77,603.16. — Aaron Michael C. Sy with Reuters