Peso may hit P60 a dollar this week amid escalating Iran war

By Aaron Michael C. Sy, Reporter

THE PHILIPPINE PESO may weaken to the P60-per-dollar level this week as surging oil prices and escalating war between the US and Iran drive demand for the greenback.

Higher oil prices could worsen inflation and weigh on economic growth in oil-importing economies such as the Philippines, analysts said.

“Higher global crude oil prices could lead to higher inflation and slower economic growth,” Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.

The peso closed at a record low of P59.735 a dollar on Friday, according to Bankers Association of the Philippines data posted on its website. The local currency fell 35 centavos from its P59.385 finish on Thursday.

During the session, the peso touched P59.75, surpassing its previous record low of P59.50 posted on March 9. The intraday low on that day was P59.71.

Week on week, the peso depreciated 73.5 centavos from its P59-a-dollar close on March 6, reflecting sustained pressure on the local currency as global markets react to rising geopolitical risks and higher commodity prices.

A trader said the peso weakened as investors sought the safety of the US dollar amid escalating tensions in the Middle East and rising oil prices.

“The dollar-peso continued to trade higher to reach a new record low still on higher oil prices and higher demand for the safe-haven dollar because of the escalating tension in the Middle East,” the trader said by telephone.

Oil prices have surged as markets brace for possible disruptions to global supply. West Texas Intermediate crude futures settled at $98.71 per barrel, up 3.11%, whilst Brent crude rose 2.67% to $103.14, settling above $100 per barrel for the first time since August 2022.

Earlier, Arsenio M. Balisacan, secretary of the Department of Economy, Planning and Development, said inflation could exceed 7% and economic growth could slow by as much as 0.3 percentage point this year if the oil price shock linked to the Middle East conflict intensifies.

The US dollar also strengthened broadly on Friday as markets pushed back expectations for interest rate cuts by the US Federal Reserve amid inflation risks tied to higher energy prices.

The dollar index, which measures the greenback against a basket of major currencies, rose 0.7% to 100.35, bringing its weekly gain to 1.5%. The euro slipped 0.6% to $1.14395.

The trader expects the peso to weaken further this week if oil prices continue to rise and geopolitical tensions escalate.

The trader sees the peso trading at P59.50 to P60 per dollar, while Ricafort expects a range of P59.30 to P59.90.