Peso weakens on worries over Middle East tensions

THE peso weakened on Monday amid declines in the local stock market and as worries over oil prices arose amid tensions in the Middle East.

The local unit closed at P50.975 on Monday, weakening by 8.40 centavos from its Friday finish of P50.891 a dollar.

The peso opened at P50.93 against the greenback. Its weakest showing was at P51.04 while its intraday best was at P50.83 per dollar. Dollars traded climbed to $1.559 billion from $1.3 billion on Friday.

A trader attributed the peso’s slump to the decline in the Philippine

Stock Exchange index (PSEi).

“PSE composition was down 2.2%. We saw that as an outflow of investment which triggered dollar buying most likely foreign selling…,” the trader said in a phone call.

Meanwhile, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said the peso’s depreciation may be due to the brewing tensions between Libya and Iraq.

“The peso may have taken cue from the increasing Middle East unrest (Iraq and Libya). Oil prices have jumped immediately due to potential supply impact,” Mr. Asuncion said in a text message.

Reuters reported that two major oilfields in southwest Libya were closed on Sunday after forces loyal to Khalifa Haftar shut down a pipeline, potentially reducing national output to a fraction of its normal level.

In December, Kuwait and Saudi Arabia agreed to end a five-year dispute over their shared Neutral Zone in a deal that will boost production by the resumption of the operation of two oilfields that can pump up to 0.5% of the world’s oil supply

For today, the trader sees the peso ranging from P50.80-P51.10, while Mr. Asuncion thinks the local unit will fare around the P50.80 to P51.10 level against the dollar.

Meanwhile, most Asian currencies ticked higher on Monday, with China’s yuan leading the pack on a firm midpoint rate fix by the central bank and robust demand ahead of a week-long New Year holiday, according to a Reuters report.

The onshore yuan gained 0.2% to 6.85 against the dollar, its strongest since early July.