THE PESO retreated against the greenback on Monday due to risk-off sentiment after the latest developments in the US-China tensions as well as weak US retail data and the continued increase in global oil prices.
The local unit finished trading at P50.90 per dollar yesterday, going down 14 centavos from its P50.76 close on Friday, according to data from the Bankers Association of the Philippines.
The peso opened the session at P50.70 against the dollar. Its weakest showing was at P50.915 while its strongest was at P50.67 versus the greenback.
The volume of dollars traded rose to $888.2 million from the $849.9 million logged on Friday.
A trader attributed the local unit’s weakness to the market’s reaction to fresh developments in the US-China trade tensions and US data.
“The peso depreciated amid the growing geopolitical tensions between US and China over the weekend and the sharp decline in US retail sales report,” the trader said in an e-mail.
China’s foreign ministry said on Saturday that the US should end its “unreasonable suppression” of Chinese firms like Huawei Technologies Co.
On Friday, Washington moved to block global chip supplies to blacklisted Huawei, which spurred fears of Chinese retaliation and hammering shares of chipmaking equipment.
Meanwhile, data from the US Commerce department showed retail sales dropped by 16.4% in April, the biggest fall since the government started tracking the series in 1992. Only online merchants were seen with higher retail receipts. The drop in April retail sales followed the 8.3% contraction seen in March.
For his part, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the peso’s depreciation came after another correction in global oil prices.
“The peso closed weaker after global crude oil prices increased further to new 2-month highs amid increasing demand,” he said in a text message.
Reuters reported that oil prices rose by more than $1 a barrel on Monday, with support from output cuts and signs of gradual demand recovery as easing measures related to the spread of the virus are gradually being lifted. Moreover, the US oil also showed no signs of last month’s contract expiry rout.
Brent crude rose by $1.06 or 3.3% to $33.56 a barrel by 0452 GMT, after touching its highest since April 13. US West Texas Intermediate crude was likewise up by $1.29 or 4.4%, to $30.72 a barrel, after rising to its highest since March 16.
This Tuesday, the trader expects the peso to move within the P50.80 to P51 band while Mr. Ricafort gave a forecast range of P50.70 to P51. — L.W.T. Noble with Reuters
