THE PESO will likely weaken against the dollar this week following escalating trade tensions between China and the United States.
The local unit ended at P51.43 versus the greenback last week, down 23 centavos from its P51.20-per-dollar finish on Thursday.
Week on week, the peso also moved lower from its P51.055 close on July 26.
“The peso (is seen) weaker amid the escalating US-China trade war after US President Donald Trump imposed a 10% tariff on an additional $300 billion imports from China,” Michael L. Ricafort, economist at Rizal Commercial Banking Corp., said in a text message yesterday.
Mr. Trump announced on Twitter he will impose another round of tariffs on Chinese goods effective Sept. 1, virtually taxing all of China’s imports to the US.
“We thought we had a deal with China three months ago, but sadly, China decided to re-negotiate the deal prior to signing. More recently, China agreed to…buy agricultural product from the US in large quantities but did not do so,” Mr. Trump said in a series of tweets, noting that trade negotiations will still push through.
In response, China’s spokesperson at the foreign ministry Hua Chunying said Beijing would take retaliatory actions if Washington is committed to slap more tariffs, Reuters reported.
Mr. Trump met with his Chinese counterpart Xi Jinping on the sidelines of G20 summit in Osaka, Japan in late June wherein both countries agreed to resume trade talks.
The world’s two biggest economies met in Shanghai last week, which yielded no result.
“We’ll still be on a wait and see for the headlines regarding the trade war. Whatever statements will be issued, it will affect the market in a big way,” a trader said in a phone interview on Friday.
Mr. Ricafort and the trader added that the market will also factor in latest US jobs data.
The US Labor Department reported on Friday that the economy added 164,000 jobs in July, a thousand payrolls short of the 165,000 expected, and lower than the 193,000 jobs created in June 2019.
Meanwhile, the unemployment rate remained steady at 3.7%.
Mr. Ricafort added that the local currency will be weaker this week amid market expectations that the Bangko Sentral ng Pilipinas will cut policy rates at its meeting on Thursday.
A BusinessWorld poll of 16 market watchers last week expect the central bank to trim benchmark rates when its Monetary Board meets this week for its fifth policy review this year, citing easing inflation and the recent policy rate cut from the US Federal Reserve.
“The market has already priced in on a rate cut by 25 basis points. Somehow, it was already seen by the market but the more important news will be on the reaction of Trump on the US-China trade talks,” the trader said.
For this week, Mr. Ricafort expects the peso to move between P51.10 and P51.60, while the trader gave a P51.30-P51.60 range for the first half of the week. — Karl Angelo N. Vidal