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Peso plunges on geopolitical concerns

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THE PESO plunged on Monday due the escalating tensions in Hong Kong, negative developments in the US-China trade war, as well as the continued decrease in inflows of foreign direct investments (FDI) into the Philippines.

The local unit closed at P50.86 against the greenback on Monday, depreciating by 37 centavos from its P50.49-to-a-dollar finish on Friday, according to data from the Bankers’ Association of the Philippines.

The peso opened weaker at P50.63 per dollar. Its lowest point for the day was at P50.888, while its best showing against the dollar was at P50.60 against the greenback.

Dollars traded on Monday climbed to $1.046 billion from $789.65 million seen on Friday.

Traders attributed the peso’s plunge to several factors including geopolitical tensions, trade war developments and the latest FDI data released on Monday.

According to one trader, the morning session saw the peso trading within a tight range, with the exchange rate seen at P50.63-P50.68 a dollar.




“By afternoon session, the movement was triggered by the geopolitical tensions in Hong Kong where protests have become more violent. It has been the main catalyst,” the trader said by phone.

The trader also observed “panic buying” and added that the decrease in FDI may have also dragged the peso’s movement.

“In the past few days, it seems that the sellers were the ones dominating. We saw panic buying in the afternoon which resulted in a “short squeeze” in liquidity. The FDI could also be a factor,” the trader explained.

Meanwhile, another trader said news on the US-China trade deals may have affected the local currency.

“[The peso was weaker on the back of risk-off sentiment after [US President] Donald [J.] Trump’s comments on US-China trade talks. He denied that they agreed for rollback in tariffs,” the second trader said in a phone call.

In Hong Kong, the police shot and wounded one protester as the Chinese-ruled territory saw a rare working-hours violence on its 24th straight week of pro-democracy unrest. The violence usually begins after dusk. Some offices were closing early and workers were heading home.

Meanwhile, Mr. Trump said on Saturday that there had been incorrect reporting about US willingness to lift tariffs, which he said had brought in tens of billions of dollars for the United States and soon “literally hundreds of billions of dollars.”

At home, net inflow of foreign direct investments continued to slide for the sixth successive month in August to $416 million, down 45.1% from the $758 million seen in the same period a year ago and by 23.38% from the $543 million recorded in July.

Economists attributed the FDI net inflow downtrend to the protracted US-China trade war as well as to investors’ wait-and-see approach as the government has yet to finalize the proposed law which will reduce corporate income tax in the country.

For today, both traders believe the peso will trade at a range of P50.70-51 against the dollar. — Luz Wendy T. Noble with Reuters

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