Peso at 11-month low; trade gap swells to $3.93B
By Doris Dumlao
Philippine Daily Inquirer
First Posted 02:32:00 08/27/2008
Filed Under: Foreign Exchange Markets, Economic Indicators
The peso Tuesday skidded to the 46-per-dollar mark for the first time in 11 months as the country’s big first-semester trade deficit stoked fears of a sharper economic slowdown alongside a weak sentiment across offshore markets.
The country’s import bill went up 12.7 percent in June from a year earlier, outpacing the export earnings growth of 8.8 percent, the National Statistics Office reported Tuesday. That brought the first-half trade deficit to $3.93 billion, more than four times the $906-million shortfall in the same period last year.
The central bank, Bangko Sentral ng Pilipinas (BSP), is bracing for additional pressure on import costs caused by the strengthening of the dollar against Asian currencies and the euro.
The peso opened trading at 45.70 to the dollar and hit an intra-day low of 46.00, its weakest rate against the greenback since touching 46.52 on Sept. 18 last year. It fell another 0.345 to the dollar to close at 45.995 from Friday’s 45.65.
Traders said there was pent-up demand for foreign exchange after a three-day weekend (Monday was National Heroes’ Day) and weak sentiment across the region contributed to sell-off pressures.
Other traders said the peso would have fallen further if not for the BSP’s unloading of dollars near the 46-per-dollar level.
“We are mindful of how the relative strength of the dollar versus the peso could impact peso prices of imported inputs to production, including oil and other non-oil commodity prices,” said BSP Governor Amando Tetangco Jr.
Jonathan Ravelas, chief strategist at Banco de Oro Unibank, said the peso’s steep fall was in reaction to the sharp rise in import expenditures that, in turn, was due to the surge in oil prices over a year ago.
Ravelas said the next barrier to the dollar’s strengthening against the peso would be at 46.50 to the dollar.
The peso and most other Asian currencies were also pulled down by the dollar’s sustained recovery against the euro, in turn stoked by fears over a slowdown in the euro zone, the unified European market.
“It’s due to risk aversion,” Export Bank treasurer Benjo Arcinas. “There’s no good news.” With editing by INQUIRER.net
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