Peso slumps to fresh low

THE PESO slumped against the dollar on Friday on the back of a wider local trade deficit.
The local unit ended Friday’s session at P52.70 against the greenback, 21 centavos weaker than the P52.49-per-dollar finish on Thursday.
This was the peso’s weakest close in nearly 12 years or since its its P52.745 finish on July 19, 2006.
The peso slipped against the dollar immediately, opening the session at P52.54, which was also its best showing for the day. Meanwhile, it slipped to a low of P52.71 versus the US currency.
Dollars traded soared to $724.2 million from $457.4 million that switched hands the previous day.
Traders said the peso slipped following the trade data released earlier today.
“The trade deficit data is a big factor today. It continues to be one of the biggest factors hounding the peso,” the trader said in a phone interview on Friday.
The country’s trade deficit widened in April as imports grew by double digits, while exports contracted anew, data from the Philippine Statistics Authority released on Friday showed.
Exports declined to $5.11 billion in April by 8.5% from the same period last year. Meanwhile, the country’s imports surged 2.22% year-on-year to $8.729 billion during the month.
This brought the country’s balance of trade to a $3.616-billion deficit in April from the$1.554 billion logged a year ago.
ING Bank N.V. Manila branch senior economist Jose Mario I. Cuyegkeng said the trade deficit supported by strong imports and weak exports will continue to pressure the local currency.
“Such a weak external payment position would continue to pressure [the Philippine peso] and increase the risk of lower foreign exchange reserves this year,” Mr. Cuyegkeng said in an e-mail.
On Thursday, the Bangko Sentral ng Pilipinas said the country’s dollar reserves dropped to a three-year low of $78.968 billion in May as the central bank used the reserves to temper sharp swings in the peso exchange amid higher gold valuations and its debt payments.
“Definitely the downbeat local trade data, along with trade fears abroad, aggravated the depreciation of the peso,”added another trader.
He said fears of a trade war were revived ahead of the G7 summit as the United States is reportedly not attending to make way for the scheduled talks with North Korea in Singapore.