THE PESO dropped further against the dollar on Tuesday, moving closer to the P57 level, amid the worsening conflict in the Middle East.
The local unit closed at P56.905 per dollar, weakening by eight centavos from its P56.825 finish on Monday, Bankers Association of the Philippines data showed.
This was the peso’s lowest close in almost two months or since its P57.245-per-dollar finish on Aug. 16.
The peso opened Tuesday’s session slightly stronger at P56.80 against the dollar. It climbed to as high as P56.72, while its weakest showing was at P56.98 versus the greenback.
Dollars exchanged rose to $1.897 billion on Tuesday from $1.295 billion on Monday.
The peso weakened on Tuesday due to safe-haven demand for the greenback amid growing tensions in the Middle East, a trader said in a phone interview.
The conflict also led to higher global crude prices and US Treasury yields, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
For Wednesday, the trader sees the peso moving between P56.60 and P57.10 per dollar as the market awaits the release of minutes of the US Federal Reserve’s September policy meeting and US consumer inflation data.
For his part, Mr. Ricafort expects the local unit to range from P56.80 to P57 versus the greenback.
The dollar clung to seven-week highs against major currencies on Tuesday as investors pondered the outlook for US rates after a strong jobs report last week dashed bets for large rate cuts, while escalating tensions in Middle East dented risk sentiment, Reuters reported.
Traders have drastically shifted their monetary easing expectations from the Federal Reserve this year.
Markets are no longer fully pricing in a rate cut in November and are ascribing an 86% chance of a 25-basis-point (bp) reduction, the CME FedWatch tool showed. Just 50 bps of easing is priced in by December, down from more than 70 bps a week earlier.
That has kept the dollar on the front foot and surging to a multi-week high against the euro, sterling and the yen, though the yen clawed back some of the losses on Tuesday as rising geopolitical worries led to safe-haven flows.
The dollar index, which measures the US currency against major rivals, last fetched 102.38, just below the seven-week high of 102.69 it touched on Friday.
Meanwhile, Israel’s military said on Tuesday it had begun ground operations in southwest Lebanon, expanding its incursions to a new zone a year after exchanges of fire began with armed group Hezbollah and amid pleas by the UN for a diplomatic solution.
The regional tensions triggered a year ago by Palestinian armed group Hamas’s attack on southern Israel have spiraled to a string of Israeli operations by land and air over Lebanon and direct attacks by Iran onto Israeli military installations. — Aaron Michael C. Sy with Reuters