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Overseas news
In the Middle East, Iran and Israel agreed to pause direct attacks after the appeal of US President Donald Trump. However, the former warned that it would resume hostilities if the latter continues striking Hezbollah in Lebanon.
This led to a rebound in US stocks as investor confidence recovered. The Dow ended lower by 0.2%, the S&P 500 was up by 0.3%, and the Nasdaq closed 0.9% higher.
The Middle East situation has greatly affected the global supply and price of oil, both of which in turn impact many asset values, businesses and economies around the world.
Also in the US, news of strong payroll growth reinforced expectations that the US Federal Reserve (the Fed) will adopt a hawkish monetary policy. The dollar also gained strength amid rising demand for safe-haven assets.
A “hawkish” approach refers to when a central bank pushes for high interest rates to fight inflation. Raised rates often strengthen the related currency as well.
Local developments
Alongside the payroll and dollar news in the US, declining Philippine foreign exchange reserves further weighed on the peso. This led the latter to open at P61.495 per US dollar on Monday, and trade between P61.48 and P61.735.
At closing, the peso ended 22 centavos lower to land on PHP 61.69, near its record of P61.75.
Investors prefer to shift to safe havens like the US dollar when risk sentiment declines. That’s why these assets typically experience more demand when economic situations become less than ideal.
The situation in the Middle East is continuing to impact economies around the world, including the one of the Philippines. Staying updated with events and avoiding emotional investing decisions may be the right move for you right now.
