Peso slumps on Trump’s move vs China
THE PESO slumped against the dollar on Friday as President Donald J. Trump imposed sanctions on China for trade violations.
The local currency closed the week at P52.39 against the greenback, 19 centavos weaker than its P52.20-per-dollar finish on Thursday.
The peso traded weaker the whole day, opening the session at its best showing of P52.25. Its intraday low was its closing rate for the day.
Dollars traded decreased slightly to $701.2 million from the $717.4 million traded on Thursday.
“The downward pressure may have come from…the probable impact of Trump’s move penalize China for various alleged trade violations,” Ruben Carlo O. Asuncion, chief economist of UnionBank of the Philippines said in a text message.
On Thursday, Mr. Trump slapped new tariffs on Chinese goods worth about $50 billion following a seven-month investigation into alleged intellectual property theft.
After this, the US is also looking at imposing investment restrictions as well as retaliatory actions at the World Trade Organization.
In response, China, through the Web site of its commerce ministry, announced it may launch reciprocal imposition of tariffs on 128 American products including wine, dried fruits and nuts and steel pipes.
The US slapped tariffs following the imposition of 25% duty on imported steel and 10% duty on imported aluminum, also directed at Beijing.
“We saw a risk-off sentiment and that affected the Asian currencies where there’s an impending move by the US to impose tariffs to China,” a trader said in a phone interview.
“We don’t know if this will escalate into a trade war. Let’s wait and see.”
Meanwhile, traders added that the decision of the Bangko Sentral ng Pilipinas (BSP) to keep its interest rates steady on Thursday also put downward pressure on the local currency.
“The peso depreciated strongly following the BSP’s decision [on Thursday] to keep its monetary policy rates steady despite apparent inflationary pressures due to the enactment of the first package of the [tax reform] law and increase on local oil prices,” another trader said.
The BSP’s Monetary Board kept policy settings unchanged at its second review this year. Rates stand at 3.5% for the overnight lending rate, 3% for the overnight reverse repurchase rate and 2.5% for the overnight deposit rate.
The monetary authority said that “the baseline forecasts continue to to show inflation remaining within the inflation target in 2018 and moderating further in 2019” despite the elevated outturns of the inflation lately.
Based on the 2006 baseline, inflation accelerated to 4.5% in February from the 4% the previous month.
BSP Governor Nestor A. Espenilla, Jr. has said that elevated inflation in the past few months is only transitory. — Karl Angelo N. Vidal
