Peso may weaken again as markets eye US-Iran talks

THE PESO could move with a downward bias against the dollar this week as players monitor the United States’ negotiations with Iran.

On Friday, the local unit closed at a fresh seven-week high of P58.585 per dollar, rising by 10.5 centavos from its P58.69 finish on Thursday, data from the Bankers Association of the Philippines showed.

Week on week, the peso jumped by 23 centavos from its P58.86 close on Jan. 30.

“The dollar-peso continued to trade with a downward bias on continued peso support after BSP (Bangko Sentral ng Pilipinas) signaled they are nearing the end of their easing cycle following the inflation release,” a trader said by telephone.

January headline inflation picked up to 2% from 1.8% in December but slowed from the 2.9% in the same month last year, the government reported last week.

Last month’s consumer price index (CPI) was the fastest in 11 months or since the 2.1% in February 2025, which was also the last time the monthly print was within the central bank’s 2%-4% annual target.

It was also higher than the 1.8% median forecast from a BusinessWorld poll of 18 economists but was within the BSP’s 1.4%-2.2% estimate for the month.

The central bank said that inflation remains benign and reaffirmed that their monetary easing cycle could end soon, with further cuts to be limited and data-dependent.

BSP Governor Eli M. Remolona, Jr. also said before the inflation data release that a cut is possible at their Feb. 19 meeting if they see the need to support domestic demand following weak economic output data.

The Monetary Board has reduced benchmark rates by 200 basis points (bps) since August 2024, bringing the policy rate to 4.5%.

Analysts widely expect a sixth straight 25-bp cut this month after Philippine economic growth slowed to a five-year low of 4.4% last year, missing the government’s 5.5%-6.5% target.

The peso was also supported by heightened expectations of further rate cuts by the US Federal Reserve later this year following weak labor data, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

For this week, the trader said the peso could weaken on geopolitical concerns due to expected talks between the US and Iran.

The trader expects the peso to move between P58.40 and P58.90 per dollar this week, while Mr. Ricafort sees it ranging from P58.30 to P58.80.

Iran’s top diplomat said on Friday that nuclear talks with the US mediated by Oman were off to a “good start” and set to continue, in remarks that could help allay concern that failure to reach a deal might nudge the Middle East closer to war, Reuters reported.

But Foreign Minister Abbas Araqchi said after the talks in the Omani capital Muscat, which involved him, US special envoy Steve Witkoff and US President Donald J. Trump’s son-in-law Jared Kushner, that “any dialogue requires refraining from threats and pressure. (Tehran) only discusses its nuclear issue … We do not discuss any other issue with the US.”

While both sides have indicated readiness to revive diplomacy over Tehran’s long-running nuclear dispute with the West, Washington wanted to expand the talks to cover Iran’s ballistic missiles, support for armed groups around the region and “treatment of their own people,” US Secretary of State Marco Rubio said on Wednesday.

A regional diplomat briefed by Tehran on the talks told Reuters Iran insisted on its “right to enrich uranium” during the negotiations with the US, adding that Tehran’s missile capabilities were not raised in the discussions.

Iranian officials have repeatedly ruled out putting Iran’s missiles — one of the largest such arsenals in the Middle East — up for discussion, and have said Tehran wants recognition of its right to enrich uranium.

Mr. Trump ratcheted up the pressure on Iran on Friday with an executive order imposing a 25% tariff on imports from any country that “directly or indirectly” purchases goods from Iran, following through on a threat he made last month.

The White House has said the measure is intended to deter third countries from maintaining commercial ties with Iran, particularly in energy, metals and petrochemicals, sectors that remain key sources of revenue for the Iranian government.

While Iran ruled out Washington’s demand for no enrichment on its soil, the diplomat who asked not to be named said Tehran showed openness to discussing the “level and purity” of enrichment or alternative arrangements, including a potential regional consortium.

In return, Iran had several demands, such as “efficient and immediate sanctions relief, including banking and oil, and the moving of US military assets away from Iran.”

World powers and regional states fear a breakdown in the negotiations would ignite another conflict between the US and Iran that could spill over to the rest of the oil-producing region. — A.M.C. Sy with Reuters