Peso inches down on Middle East conflict

THE PESO weakened slightly against the dollar on Wednesday amid escalating tensions in the Middle East.

The local unit closed at P56.178 per dollar on Wednesday, dropping by 3.3 centavos from its P56.145 finish on Tuesday, Bankers Association of the Philippines data showed.

The peso opened sharply weaker at P56.38 against the dollar. Its intraday best was at P56.03, while its worst showing was at P56.42 versus the greenback.

Dollars exchanged went down to $1.95 billion on Wednesday from $2.22 billion on Tuesday.

The peso inched down amid safe-haven demand for the dollar due to risk-off sentiment as the Middle East conflict continued to escalate, a trader said by phone.

The dollar held onto its biggest gains in a week on Wednesday after an Iranian missile attack on Israel drove the buying of safe-haven assets as investors fretted about the widening of conflict in the Middle East, Reuters reported.

The US dollar index, which tracks the currency against a basket of peers, was steady at 101.25 after rising 0.5% on Tuesday.

Iran said on Wednesday its missile attack on Israel, its biggest military assault on the Jewish state, was over, barring further provocation, while Israel and the United States said they would retaliate against Tehran.

Israel said Iran fired more than 180 ballistic missiles and Iran’s Revolutionary Guard Corps said the attack was retaliation for Israeli killings of militant leaders and aggression in Lebanon against the Iran-backed armed movement Hezbollah.

Dampened expectations of big rate cuts by the US Federal Reserve also supported the dollar, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Macroeconomics buoyed the dollar, with a resilient US job market arguing for a smaller Fed interest rate cut in November.

Job openings unexpectedly increased in August after two straight monthly decreases, but hiring was soft and consistent with a slowing labor market.

For Thursday, the trader said the peso will move depending on the US ADP employment report.

The trader sees the peso moving between P56 and P56.50 per dollar on Thursday, while Mr. Ricafort expects it to range from P56.10 to P56.30. — AMCS with Reuters