THE PESO weakened versus the dollar on Tuesday on safe-haven buying amid jitters between the United States and North Korea.

The local currency closed at P50.935 against the greenback yesterday, 22.5 centavos weaker than the P50.71-per-dollar finish logged on Monday.

The peso opened weaker at P50.72 per dollar, which was already its peak for the day. Its intraday low was at P50.94 against the foreign unit.

Dollars traded stood at $687.9 million, down from the $788.7 million seen in the previous session.

Foreign exchange traders said the local foreign exchange market was still spooked by the “word wars” between American and North Korean leaders, even as these have yet to turn into action.

“Today it was higher mainly due to tension from geopolitical risk between North Korea and US,” a trader said in a phone interview on Tuesday.

“Geopolitical is risk-off, so it’s still safe-haven buying. They’re going to buy the greenback as tensions continue to rise,” the trader added.

Another trader noted that the US was trying to fly bombers near the North Korean borders.

“That’s why I think the tension would continue to grow. Any move will drive the market jittery,” the trader said.

Moreover, the first trader added that Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla’s speech in Tokyo, in which he said a weaker peso is favorable for the economy, also drove the local currency down.

A decline in the Philippine peso is in line with economic fundamentals and will support growth by encouraging more investment in infrastructure, Mr. Espenilla said on Tuesday.

Speaking at a seminar in Tokyo, the BSP chief said he saw limited pass-through to inflation from moves in the peso and said the current account balance was manageable.

This is expected to push the current account into deficit for the first time in 15 years, which has raised some concerns among foreign investors about the country’s resilience to external shocks.

“The peso’s depreciation is in line with economic fundamentals,” Mr. Espenilla said.

“What has changed is this current account deficit is a good deficit because it is being driven by investment. The Philippines is different than it was in the 1990s and during the Asian Financial Crisis.”

Some investors and economists still harbor memories of the 1997 Asian currency crisis, when high levels of dollar-denominated debt and current account deficits roiled Southeast Asian currencies.

The BSP chief dismissed these concerns, saying the Philippines has higher currency reserves, stronger economic growth, and lower levels of inflation.

For today’s session, market movements will still be pegged on developments in the US-North Korea situation, traders said.

“If it continues to develop tension, then the dollar is still a buy. It’s the center of the market right now,” the first trader said.

The second trader noted that US Federal Reserve Chair Janet L. Yellen’s speech scheduled later in the day may drive the peso weaker as she could affirm the US central bank’s plan to raise policy rates for a third time this year in December.

Both traders forecast a P50.80-P51.10-per-dollar range versus the greenback for this trading day. — Elijah Joseph C. Tubayan with Reuters

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