THE peso weakened to a new 12-year low against the dollar on Monday, weighed down by geopolitical developments and worries over an expected US interest rate increase announcement.
The currency closed 25 centavos down at P52.95:$1, its lowest since a P52.98:$1 finish on July 3, 2006.
Land Bank of the Philippines market economist Guian Angelo Dumalagan and Bank of the Philippine Islands Vice-President and lead economist Emilio Neri Jr. both traced the peso weakness to expectations of a trade row escalation following the weekend’s acrimonious G7 summit.
“It is because of safe-haven buying following the recent G7 summit,” Dumalagan said.
Neri said the fall was “partly reflecting uncertainties about the fate of the global trading system following the G7 developments over the weekend.”
US President Donald Trump capped a testy meeting of the world’s biggest economies by refusing to endorse a joint communiqué, further adding fuel to a trade dispute with major allies such as G7 summit host Canada.
Dumalagan also pointed to uncertainties over the outcome of today’s historic meeting between Trump and North Korean leader Kim Jong-un in Singapore.
“The dollar also received some boost from expectations of another rate hike from the US Federal Reserve this week,” he added.
Neri, in an outlook, said the rapid widening of the Philippine trade gap, dwindling gross international reserves and the variance in the country’s interest rate policy against the United States “all point to the need for the peso to continue becoming more competitive against the US dollar.”
The trade deficit widened further in April to $3.62 billion, more than double the $1.55 billion recorded in the same month last year.
The country’s dollar reserves, meanwhile, fell to a new three-year low of $78.96 billion in May, down 0.80 percent from April and also lower compared to the $82.17 billion recorded a year earlier.
The peso, described as Asia’s worst-performing currency this year, first touched the P52:$1 level on February due to a widening trade deficit and concerns over the pace of Fed interest rate hikes.