THE PESO plunged against the dollar on Monday, tracking the movement of the Asian currencies following the crash of the Turkish lira.
The local currency closed Monday’s session at P53.37 versus the greenback, 23.5 centavos weaker than the P53.135-per-dollar finish Friday last week.
The peso traded weaker the whole day, opening the session at the session’s high of P53.18 against the dollar. Its weakest showing on the other hand stood at P53.375 versus the greenback.
Dollars traded climbed to $757.9 million from the $664.3 million that switched hands the previous session.
“The peso heavily depreciated [on Monday] as geopolitical issues in Turkey drove safe-haven buying towards the dollar against emerging market currencies, which includes the Philippine peso,” a trader said in an e-mail.
“Asian currencies were affected by the issue in Turkish lira where we saw risk aversion over the weekend,” a second trader said. “We’re seeing a little bit of sell-off in the region right now.”
Asian currencies were battered on Monday, with the Indian rupee touching a record low, as the ongoing crisis in Turkey spilled over to emerging markets and investors flocked to safe-haven assets.
The Turkish lira tumbled to a record low, weakening as much as 13.34%, over concerns about Turkish President Tayyip Erdogan’s rigid control over the economy and a worsening diplomatic rift with the United States.
“If investors continue to be concerned about the events in Turkey, and they likely will be, we could see more pain in store when it comes to risk appetite in the week ahead,” Jameel Ahmad, global head of currency strategy & market research at FXTM, wrote in a note.
Investors fear the sell-off in the lira could have a ripple effect in global financial markets with the euro, the South African rand and Mexico’s peso already on the receiving end from Turkey’s crisis.
Mr. Erdogan, who has called himself the “enemy of interest rates,” wants cheap credit from banks to fuel growth, but investors fear the economy is overheating and could be set for a hard landing. The exposure of European banks to crisis-hit Turkey prompted investors to bid up safe havens such as the US dollar and Japanese yen.
The dollar index added 0.07% at 96.423 while the yen strengthened 0.58% by 0535 GMT.
The Indonesian rupiah plunged nearly 1% on to its weakest since October 2015, after data showed on Friday the country’s current account deficit, a major concern for global emerging market investors, swelled in the second quarter to the largest in nearly four years.
China’s yuan slid 0.5%, in line with regional peers.
South Korea’s won and the Taiwan dollar weakened 0.48% and 0.32%, respectively.
India’s rupee, which has been the region’s worst performing currency so far this year, weakened more than one percent hours before consumer inflation data for July was due.
For Tuesday, the first trader expects the peso to move between P53.25 and P53.45 versus the dollar, while the other gave a P53.30-P53.55 range.
“We’ll continue to track the moves in the emerging markets. If we continue to see the risk-off sentiment persist, I guess the dollar-peso will be pressured to move in tandem again with the dollar-Asia [on Tuesday],” the second trader said. — Karl Angelo N. Vidal with Reuters