Peso nears 62:$1 level

MANILA, Philippines — The peso came close to breaching the 62-per-dollar level yesterday as renewed geopolitical tensions and rising crude oil prices drove investors toward the safe-haven dollar, although the local currency recovered some ground before the close.

Data from the Bankers Association of the Philippines showed the peso closed at 61.815 per dollar yesterday, weaker by three centavos from Tuesday’s 61.785 finish.

The local currency opened at 61.85 and declined to 61.995, its weakest level on record, before recovering toward the close. Despite the renewed pressure, Wednesday’s finish remained stronger than the record closing low of 61.847 per dollar recorded on July 24.

Trading activity picked up sharply, with total volume jumping by 41.3 percent to $1.89 billion from $1.34 billion in the previous session.

A trader said the peso’s move toward 62 reflected renewed demand for safe-haven assets after a temporary agreement between the United States and Iran expired, reviving concerns over the Middle East conflict.

The trader said the Bangko Sentral ng Pilipinas could consider intervening if the exchange rate reaches the 62 level, although a breach is not yet seen as imminent given heightened uncertainty ahead of the BSP’s upcoming policy decision on Aug. 27.

Jonathan Ravelas, senior adviser at Reyes Tacandong & Co., said investors were also positioning ahead of the release of the minutes of the US Federal Reserve’s latest meeting as they looked for clues on the future direction of interest rates.

“The dollar is stronger today for two reasons: first, investors are positioning ahead of the Fed minutes, hoping for guidance on the interest rate outlook. Second, lingering geopolitical uncertainty in the Middle East is encouraging a flight to safety,” Ravelas said.

“In uncertain times, the dollar remains the world’s preferred safe-haven currency,” he added.

Ravelas expects the peso to trade between 61.60 and 62 per dollar in the near term.

UnionBank chief economist Ruben Carlo Asuncion likewise said the latest weakness of the peso was mainly being driven by external factors, including higher oil prices, geopolitical tensions and sustained strength in the dollar.

Asuncion noted that the Philippines’ dependence on imported oil makes the currency particularly sensitive to increases in global energy prices.

Asuncion said the peso’s near-term direction would continue to depend heavily on movements in crude oil prices, developments in the Middle East and the strength of the dollar.

“If these external pressures persist, the peso could remain under pressure near current levels,” Asuncion said.