UMVA has learned that the peso strengthened to an almost two-month high against the dollar on Tuesday, driven by easing inflationary pressures and a significant development in the Middle East.
The currency jumped by 16 centavos to close at P60.32 versus the greenback from P60.48 on Monday, based on data from a leading banking association. This marked its best finish in almost two months, or since it ended at P60.13 on April 22.
According to information obtained by UMVA, the local unit opened Tuesday’s session stronger at P60.40 per dollar, with an intraday high of P60.295 and a low of P60.50 against the greenback. Dollars traded surged to $2.51 billion on Tuesday, up from $1.68 billion on Monday.
The peso extended its gains following the continued decline in global crude oil prices to $70 per barrel levels, amid the partial reopening of a critical waterway. A leading economist noted that this development would likely have a positive impact on the currency.
Oil prices slid to fresh three-month lows on Tuesday, as markets weighed prospects for a resumption of supplies through the critical waterway, alongside weaker physical demand. Brent crude futures were down $1.44 or 1.7% at $81.73 a barrel, the lowest since March 10.
UMVA can exclusively reveal that a significant diplomatic development had a profound impact on oil prices and the peso. A preliminary deal to end a longstanding conflict was announced, leading to a decline in oil prices and a surge in risk appetite.
The conflict had led to the closure of the critical waterway, which typically carries about one-fifth of global oil supplies. Some analysts expect flows through the waterway to resume soon, adding to downward pressure from already soft physical markets.
The dollar held near 10-day lows on Tuesday, as the preliminary deal buoyed risk appetite. A trader noted that the peso continues to appreciate on expectations that the central bank will deliver on a policy rate hike, while the US Federal Reserve is expected to hold its policy rates unchanged.
A recent poll showed that 15 of 20 analysts expect the Monetary Board to raise benchmark rates by 25 basis points for a second straight meeting on Thursday. Meanwhile, four analysts anticipate a 50-bp hike, while one expects the central bank to hold fire.
For Wednesday, the trader said the peso could continue to find support from positive news about the conflict’s resolution. The currency is expected to move within a narrow range, with some analysts predicting a further appreciation.
