Strait of Hormuz conflict risks PH peso freefall

The peso is at risk of sinking to a record low beyond 61 per dollar as escalating Middle East hostilities threaten to choke global energy supplies and force a hawkish pivot from the Bangko Sentral ng Pilipinas (BSP).

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Michael Wan, MUFG Bank Ltd. senior currency analyst, warned in aresearch note on Monday, March 9, that the local currency remains highly vulnerable to a sustained conflict between Israel and Iran.

“We see the peso as vulnerable and the US dollar-peso possibly rising above the 60 level if the Iran and Middle East conflict is sustained and the Strait of Hormuz remains closed, with oil prices already reaching above $100 per barrel (bbl) at the time of writing,” Wan said.

As of early Monday, March 9, the peso weakened toward an all-time low as an escalating military conflict in the Middle East drove investors to the safety of the US dollar.

The peso opened the trading week at 59.25 per dollar, then hit its weakest level of 59.6, according to the Bankers Association of the Philippines (BAP).

This marked a significant drop from last Friday’s 59.00 finish and pushed the peso past its previous record low of 59.44 set on Jan. 14.

Rizal Commercial Banking Corp. chief economist Michael Ricafort said this slump followed a sharp spike in global oil prices.