THE PESO edged lower on Monday after China’s central bank devalued its own currency in retaliation against US’ planned additional tit-for-tat tariffs on China this September.
The local currency finished Monday’s session at P51.79 versus the greenback, 36 centavos lower than its P51.43-per-dollar close last Friday.
The local unit traded weaker on Monday, opening the session at P51.60 versus the dollar. Its best showing was at P51.55, while its worst was at P51.85 versus the dollar.
Trading volume widened to $1.39 billion on Monday compared to the $1.278 billion that changed hands last Friday.
“Peso’s movement yesterday was a continuation of what transpired last week that saw increasing tensions between the two countries,” a bond trader interviewed by phone said, referring to the additional 10% tariffs on $300-billion worth of Chinese goods to be imposed by US President Donald J. Trump effective Sept. 1.
“The peso weakened on heightened global market risk-off sentiment amid the renewed escalation of US-China trade tensions and after the People’s Bank of China (PBoC) set the fixing rate for the yuan below the 6.90 level, bringing market rates for the offshore yuan past the 7-yuan psychological level,” a trader said in a separate e-mail interview.
Majority of Asian currencies went down yesterday after the PBoC fixed its exchange rate at 7 yuan versus the greenback — the first time in a decade — in retaliation against Mr. Trump’s recent decision.
The second trader said that market participants were cautious ahead of key local economic data releases this week, with the peso likely to weaken today.
The government is set to report July inflation and June manufacturing output data today as well as June merchandise trade and second quarter agriculture performance data on Aug. 7. Data on the country’s second quarter economic performance are due out on Aug. 8, hours before the Bangko Sentral ng Pilipinas’ (BSP) policy meeting.
“The peso might continue to weaken [today] ahead due to the likely softer Philippine July inflation report,” the second trader said.
A BusinessWorld poll of 17 analysts and a research group yielded a 2.4% median for July inflation, which settles at the midpoint of the 2-2.8% estimate range given by the BSP.
If realized, it will mark the second straight month of slower inflation from June’s 2.7% print and will be lower than July 2018’s 5.7%.
A separate poll of 15 economists bared a median estimate of 5.9% gross domestic product (GDP) growth for the second quarter, picking up from the 5.6% growth recorded in the first quarter that was the slowest in four years, albeit slower than the 6.2% clocked in last year’s second quarter.
If realized, this would bring GDP growth to 5.7% in the first half, compared to the 6-7% target set by economic managers for this year.
For today, the first trader sees peso trading between P51.50 and P52 versus the dollar, while the other gave P51.65-P51.95 range. — Mark T. Amoguis