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Peso drops on renewed US-China tensions

peso drops on renewed us china tensions - Peso drops on renewed US-China tensions

THE peso weakened on Thursday as the market preferred the safe-haven greenback amid renewed tensions between Washington and Beijing.

The local unit finished trading at P48.68 versus the dollar on Thursday, depreciating by 10.5 centavos from its P48.575 close on Wednesday, data from the Bankers Association of the Philippines showed.

Still, the peso was stronger by three centavos from its P48.765-per-dollar finish on Aug. 14. Markets are closed on Friday for Ninoy Aquino Day.

The peso opened Thursday’s session at P48.61 per dollar, which was also its intraday best. Meanwhile, its weakest showing was at P48.71 against the greenback.

Dollars traded slipped to $788.66 million from the $794.5 million logged on Wednesday.

The local unit declined versus the dollar after renewed trade tensions between the world’s two biggest economies, a trader said.

“The peso weakened from safe-haven demand amid escalating geopolitical tensions between the US and China after US President Donald J. Trump suspended the review of their first-phase trade deal,” the trader said in an e-mail.

White House Chief of Staff Mark Meadows told reporters on Tuesday aboard Air Force One that the US and China have yet to set a schedule for a new trade talk, but have remained discussing the implementation of a Phase 1 deal, Reuters reported.

Mr. Meadows said a mandated review is part of their trade pact with Beijing and that US Trade Representative Robert Lighthizer continues to speak with his Beijing counterparts regarding their commitments.

Mr. Trump earlier postponed the scheduled Aug. 15 review of Washington’s trade pact with China as he was frustrated over Beijing’s policies to arrest the spread of the virus.

Remarks from the US Federal Reserve on the continued impact of the coronavirus disease 2019 (COVID-19) to the US economy also affected market sentiment yesterday, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

“The peso closed weaker after the Fed’s latest signals that the coronavirus would weigh heavily on the economy and the economic recovery would depend on the virus containment,” Mr. Ricafort said in a text message.

The minutes of the Federal Open Market Committee’s July meeting said the situation shows “substantial improvement” will depend on “broad and sustained” reopening of the economy, Reuters reported.

“Noting the increase in uncertainty about the economic outlook over the inter-meeting period, several participants suggested that additional accommodation could be required to promote economic recovery…,” the minutes said. — L.W.T. Noble with Reuters

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