Peso may stay rangebound as markets await ME breakthrough

THE PESO could continue to move sideways versus the dollar this week as the Middle East (ME) situation remains uncertain despite signals of a “largely negotiated” deal between the United States and Iran that could reopen the Strait of Hormuz.

On Friday, the local unit declined by 10.9 centavos to close at P61.69 against the greenback from P61.581 on Thursday.

Week on week, the peso inched up by 3.1 centavos from its P61.721 finish on May 15. This is even as it closed at a new record low of P61.75 versus the dollar on May 18 and 19.

The peso weakened on Friday after trading within a narrow range as the market remained cautious due to fresh policy signals from the Bangko Sentral ng Pilipinas (BSP), a trader said by phone.

“There’s uncertainty as to whether there will be an off-cycle hike or if they will wait for… inflation [data],” the trader said.

The lack of progress in the US-Iran negotiations also kept the pair trading sideways on Friday, the trader added.

In an interview on One News’ Money Talks with Cathy Yang on Thursday, BSP Governor Eli M. Remolona, Jr. said the Monetary Board is considering a second straight rate hike, maybe even before its scheduled June 18 meeting, as persistent shocks from the Middle East conflict continue to feed into domestic consumer prices.

However, he said that they may also wait until the May inflation report comes out on June 5.

On April 23, the Monetary Board raised its policy rate by 25 basis points to 4.5%, marking its first tightening move since October 2023, with the BSP chief signaling more “modest” rate hikes ahead as they expect the war to push headline inflation past their target until next year.

The peso was relatively stable against the greenback on Friday due to potential intervention from the central bank that prevented it from weakening past the P61.70 level again, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

For this week, the trader said the peso could stay weak despite the BSP’s hawkish rhetoric amid safe-haven demand for the dollar and higher oil prices, adding that the currency could move between P61.45 and P61.75 against the greenback, depending on developments in the Middle East.

Mr. Ricafort expects the local unit to range from P61.35 to P61.85 versus the greenback/

“The latest proposal from the US partly bridged the gap between the warring sides. However, comments from Iran’s Supreme Leader about keeping Iran’s uranium stockpile and a dispute over tolls in the Strait of Hormuz clouded the outlook for a breakthrough,” he said. — A.M.C. Sy