Peso weakens as dollar strengthens

The peso continued to weaken yesterday against the dollar, shedding another 14.50 centavos to settle at 55.040 to $1 from Monday’s close of 54.895 to the dollar.

Analysts said the weakening of the peso was due mainly to the dollar’s strengthening against major global currencies as dealers saw an end in sight to months of uncertainty over the Iraq crisis after the US abandoned efforts to win UN support for war (see related story on B-10).

They said the fact that war is imminent has reduced one level of uncertainty that has been weighing on the dollar in recent months.

Trading at the Philippine Dealing System (PDS) saw the peso opening at 54.980 before hitting a high of 54.980 and a low of 55.100 to the dollar.

Total volume traded amounted to only $43 million on an average of 55.059 to the dollar.

Local traders said the dollar has been on a roll since last week’s report about a "quick surrender" by Iraqi forces.

"The dollar may continue to strengthen in the coming days as the prospect of war becomes even more imminent," they said.

However, the ferocity of the dollar’s gains baffled many market watchers, particularly as the currency has long been undermined by a sense that it would be most at danger from a scenario that would see the US going to war in Iraq with only the support of a few allies and without the seal of approval of the UN Security Council.

Now that a scenario appears to be indeed unfolding, the dollar’s gains seem surprising. Some analysts cautioned, however, against reading too much into the currency market moves.