Peso falls to P53.51:$1; risk-off sentiment cited
THE Philippine peso fell to a fresh 12-year low on Thursday, closing at P53.515 against the dollar due to factors such as the country’s widening trade deficit, tariff wars between the world’s biggest economies and more US Federal Reserve rate hikes.
The currency, which has been described as Asia’s worst-performing this year, closed 4 centavos down from P53.475:$1 on Wednesday, its lowest since a P53.55:$1 finish on June 29, 2006.
The fall into the P53:$1 level also means that the peso-dollar rate has breached the government’s P50-53:$1 assumption for the year.
Analysts from Security Bank Corp. and IHS Markit said that in addition to a deteriorating trade deficit and more attractive US interest rates, the peso was also being pulled down by rising crude prices and concerns of a full-blown global trade war.
“I think the peso depreciation was partly induced by risk-off sentiment amid escalating global trade war as well as rising global oil prices that tend to adversely affect emerging markets,” Security Bank economist and Assistant Vice-President Angelo Taningco said.
IHS Markit Asia Pacific chief economist Rajiv Biswas, meanwhile, said the country’s trade deficit had expanded significantly in the first semester and added that “US-China trade tensions and expected further US Fed rate hikes have continued to create uncertainty and bearish sentiment for Asian emerging market currencies, including the PHP.”
The Philippine government has yet to report the country’s trade balance for the first six months of the year but latest data showed the trade gap had risen by 59.3 percent to $12.200 billion from January to April.
The peso is widely expected to weaken further and on Wednesday, BMI Research said it now expected the currency to fall to P54:$1 by the end of 2018.
“Given that technicals and fundamentals on balance are pointing to further weakness, we are revising our forecast for the PHP to end the year around PHP54/USD, from PHP51/USD previously…,” the Fitch Group unit said in a report.
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