The peso dropped in value against the dollar on Wednesday due to a fresh escalation in the Middle East conflict, which has put the fragile ceasefire between the United States and Iran at risk. The local unit declined by seven centavos to finish at P61.505 against the greenback. This decline was a result of the increased tensions in the region. The currency began the day weaker and sank to as low as P61.625 intraday.
The volume of dollars traded also decreased, dropping to $1.164 billion from $1.377 billion. The depreciation of the peso was attributed to the renewed safe-haven demand for the dollar, driven by military skirmishes in the Strait of Hormuz. This led to a slight increase in global crude oil prices, which also affected the exchange rate.
The increase in crude oil prices was significant, with Brent crude oil price rising by more than 2% to trade at $76 per barrel levels. This was a result of the US launching fresh airstrikes in Iran and revoking a waiver that allowed Iran to sell oil globally. The escalation of hostilities in the region has pushed oil prices up to a two-week high.
The attacks by Iran on US military sites in Bahrain and Kuwait have further undermined efforts to turn the interim ceasefire agreement into a permanent peace deal. The US President has stated that an interim agreement to end the war with Iran is "over" after Tehran carried out new attacks on US bases in the Gulf. The dollar has also hit fresh highs versus major currencies due to reduced odds of a hike from the US Federal Reserve.
For Thursday, potentially hawkish hints from minutes of the Fed's latest meeting could cause the peso to weaken further. Analysts predict that the peso will move between P61.40 and P61.65 versus the dollar. The ongoing tensions in the Middle East and the potential actions of the US Federal Reserve will likely continue to impact the value of the peso in the coming days.
