US-Iran stalemate may keep peso weak

THE PESO could continue to trade in a narrow range this week as the lack of progress on a deal to end the conflict between the United States and Iran will likely continue to drive demand for the dollar.

On Friday, the local unit rose by 15.5 centavos to close at P61.47 against the greenback from its P61.625 finish on Thursday.

However, week on week, the peso declined by eight centavos from its P61.39-a-dollar close on May 29.

“The dollar-peso closed lower following the lower-than-expected local consumer price index (CPI) release,” a trader said in a phone interview on Friday.

Headline inflation settled at 6.8% in May, easing from 7.2% in April but quickened from the 1.3% in the same month last year, the government reported on Friday.

This was the first time since November 2025 that the headline print cooled month on month, and was the slowest pace in two months or since the 4.1% in March.

The May reading also came as a surprise as a BusinessWorld poll of 16 economists yielded a median estimate of 7.9% for the month. It was also below the Bangko Sentral ng Pilipinas’ (BSP) forecast of 7.1-7.9%.

Still, May marks the third month in a row that the headline inflation has topped the central bank’s 2%-4% target, bringing the year-to-date average inflation past the goal at 4.5%.

The peso also continued to climb after the BSP warned banks against using foreign exchange (FX) forwards to profit from currency volatility, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

A BSP memorandum released late on Wednesday said that non-deliverable FX contracts must have legitimate economic purposes and must not be used for “speculative positioning, directional peso exposure, or arbitrage-driven activities.”

Mr. Ricafort also noted that the peso managed to finish better than its record-low close of P61.75 the entire week despite testing it several times, which was likely due to central bank intervention.

The BSP has said that it maintains a presence in the FX market to prevent sharp swings in the peso that could be inflationary, but does not have a target level for the currency.

For this week, the trader said lingering uncertainty over the US-Iran war may continue to provide support for the dollar.

“Markets will be watching US-Iran talks developments, so further downside may be limited.”

The trader sees the peso moving between P61.30 and P61.75 a dollar this week, while Mr. Ricafort expects it to range from P61.25 to P61.75.

The dollar was higher on Friday and set for a more than 1% weekly gain after the ‌US economy posted another month of strong employment gains in May, Reuters reported

Nonfarm payrolls increased by 172,000 jobs last ​month, the Labor department’s Bureau of Labor Statistics said in its closely watched employment report on Friday. Economists polled by ​Reuters had forecast payrolls increasing by 85,000 jobs after a previously reported 115,000 rise in April.

The number sent the dollar up sharply against the yen, which has been testing the ¥160-per-dollar barrier this week, drawing sharp warnings from Japanese officials as Middle East tensions have underpinned safe-haven demand.

The yen was last down 0.08% against the dollar at ¥160.150. It was headed for a fourth straight weekly loss against the dollar, having unwound gains from official buying in late April and early May.

The ¥160-per-dollar mark has previously triggered intervention and its proximity prompted another warning from Finance Minister Satsuki Katayama, who said Japan was ready to respond at any time and reserved the right to take “decisive action” against excessive volatility.

The Bank of Japan is widely expected to raise interest rates this month, as higher energy import costs add to price pressures. Money markets also point to a second hike by yearend.

Investors widely expect the Fed to leave rates unchanged when it meets this month, according to CME’s FedWatch tool.

The euro fell after the release of US jobs data, and was last down 0.75% at $1.152, despite expectations of up to three European Central Bank rate hikes this year. The pound fell 0.64% to $1.33.

Peace talks between the US and Iran are at a stalemate, and a reignition of hostilities last week has kept oil above $90 a barrel, raising risks to global growth.

The US government will attempt to redirect Iranian assets to Gulf states for rebuilding and repairs of damage caused by Iran, a source familiar with the matter said, as Tehran followed up a wave of strikes against Kuwait and Bahrain with further drone launches.

US Treasury Secretary Scott Bessent has directed a team to assess costs for damages already inflicted on Gulf allies by Iran, the source said, adding that the US will consider using Iranian assets for repairs of any future destruction as well.

The disclosure came a day after Mohsen Rezaei, an adviser to Iran’s supreme leader, told CNN that a peace deal to end the three-month war hinged on the release of $24 billion in Iranian assets frozen by the United States.

The source on Saturday did not specify what kind of assets the Treasury was examining. The language used to describe the new measures did not appear limited to frozen assets.

The threatened redirection of Iranian assets could create a new irritant to a fragile ceasefire between the United States and Iran, which was tested again this weekend with strikes by the US and Iran.

The US and Iran have been engaged in largely indirect negotiations for an interim deal to halt the three-month-old war that would leave issues including Iran’s nuclear program to further negotiations.

But a deal has remained elusive while the two sides have periodically skirmished.

Tehran wants access to billions of dollars in oil revenue, waivers on sanctions on crude exports, the lifting of a US blockade on its ports and leverage over the Strait of Hormuz. Iran has effectively blocked the waterway, where about a fifth of global oil traffic transited before the war.

The conflict has driven up oil prices and disrupted supply chains for other goods, including humanitarian aid. — Aaron Michael C. Sy with Reuters