THE peso weakened on Thursday as the market reacted to rising geopolitical tensions in major economies, such as the border clash between China and India.
The local currency depreciated by 14 centavos to close at P50.17 against the greenback yesterday from P50.03 on Wednesday.
The peso started the session at P50.06 versus the dollar, depreciating to as low as P50.18. Meanwhile, its strongest showing was at P49.96 against the greenback.
Dollars traded jumped to $1.166 billion on Thursday from the $768.5 million seen on Wednesday.
A trader said the local unit depreciated amid investors’ flight to safety due to escalating tensions in major economies.
“The local currency weakened from safe-haven demand amid the growing geopolitical tensions in Korea and between China and India,” the trader said in an email.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said via Viber that the peso ended weaker on profit-taking in global stock markets following earlier gains, resulting in an upward correction in the US dollar against other global currencies.
“Upward correction in the US dollar vs. major global currencies came after renewed tensions between China and India, also in the Korean Peninsula,” Mr. Ricafort added.
At least 20 Indian soldiers were reportedly dead after Indian and Chinese troops clashed Monday at a disputed Himalayan border, according to reports by Reuters.
Investors also reacted to the rising tensions between South Korea and North Korea after the latter demolished the joint Korean liaison office established in the border town and rejected South Korea’s offer to send special envoys and redeploy troops at the border, according to Reuters.
UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion, said the local unit declined after optimism sparked by the fiscal stimulus of the US government faded over concerns on economic recovery, with the number of coronavirus cases continuing to rise in the economic giant.
Back home, Mr. Asuncion said “dovish sentiments by the BSP (Bangko Sentral ng Pilipinas) governor may have also dampened the peso.”
Meanwhile, the trader expects peso to strengthen “on expectations of further moderation in the US initial jobs claims report overnight.”
For today, the trader expects the peso to settle between P50.05 and P50.25 per dollar, while Mr. Ricafort and Mr. Asuncion gave the same forecast range of P50.00-P50.30. — B.M. Laforga