Back from a three-week low
The peso recovered from a three-month low in Monday’s trade as investors began shaking off geopolitical concerns and sought fresh trading leads as usual.
The local currency firmed to P43.86 to $1 at the end of the first trading day of the week, gaining 27 centavos from the P44.13 closing rate on Friday. Total volume transacted on the Philippine Dealing System thinned to $957.4 million from $1.380 billion on Friday.
That day, the peso shed 5 centavos, or 0.1 percent, hitting its lowest level since May 8, when the local currency traded at P44.12. Besides geopolitical risks, the World Bank’s downward revision of its growth projection for the Philippine economy, coupled with a higher inflation rate, were also blamed for the drop in the value of the peso last week.
Jonathan Ravelas, chief market strategist at Banco De Oro, said the peso’s weak performance last week was a reaction to the United States government’s decision to permit airstrikes on Iraqi militants.
Last week, President Barack Obama ordered US warplanes back into the skies over Iraq to drop food to refugees and if necessary launch air strikes to halt what he said was a potential “genocide.” Obama also warned that he had also authorized the military to carry out targeted strikes in support of Iraqi forces to break the Islamists’ advance or to protect US advisors working on the ground.
“What we saw last week was a knee-jerk reaction to Obama’s decision to authorize air attacks which highlights risk aversion. Today’s movements are nothing but a normalization,” Ravelas said.
The analyst said the local currency is expected to range between P43.70 and P44.25 in the near term.
However, a “USD/PhP exchange rate lower [or stronger for the peso]than 43.70 could be difficult as geopolitical risk remains,” he added.