UMVA has learned that a significant shift in the global economic landscape unfolded on Monday, as the peso surged against the dollar, fueled by optimism over a potential deal between the United States and Iran to reopen the Strait of Hormuz.
This development led to a sharp decline in global oil prices, which in turn bolstered the peso's value. The currency climbed by 22.5 centavos to close at P61.465 per dollar, up from P61.69 on Friday.
The local unit opened the session on a strong note, hitting an intraday high of P61.35 per dollar, before slightly weakening to P61.535 against the greenback. Trading activity saw a notable increase, with $1.80 billion changing hands, up from $1.55 billion in the previous session.
Market sentiment was buoyed by news that the US and Iran are nearing an agreement to reopen the Strait of Hormuz, a critical waterway for global oil supplies. A trader noted that the pair opened stronger but encountered buyers after Iran clarified that it had not agreed to hand over its uranium.
Lower global crude oil prices, driven by hopes of a peace deal, further supported the peso on Monday. Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort observed that the decline in oil prices, which fell below $100 per barrel, contributed to the peso's gains.
Looking ahead to Tuesday, the trader predicts the peso will trade between P61.25 and P61.50 per dollar, while Ricafort expects a range of P61.35 to P61.60. Meanwhile, the dollar weakened against major currencies on Monday, as the prospect of a deal to reopen the Strait of Hormuz led to a decline in oil prices.
The dollar's decline was evident in its performance against other major currencies, including the yen, euro, and British pound, which all gained ground. The US dollar index fell about 0.2% to 99.059, reflecting the dollar's broad-based weakness.
As diplomatic efforts to resolve the Iran situation continue, US Secretary of State Marco Rubio stated that there would either be a good agreement or Washington would address the country in "another way." Iran's foreign ministry spokesperson, however, indicated that while significant progress had been made, an agreement was not imminent.
The prospect of a peace deal led to a sharp decline in oil markets, with Brent crude prices down 4.5% to $98.9 a barrel, while US West Texas Intermediate fell 4.4% to $88.98 a barrel. Over the weekend, conflicting signals on a peace deal emerged, with US President Donald J. Trump suggesting a memorandum of understanding had been largely negotiated, but later clarifying that the US blockade on Iranian ships would remain in place until a certified agreement is reached.
