The Philippine peso weakened further against the US dollar on Wednesday, touching a near 11-year low in line with regional reaction to tensions over the Korean peninsula, which has prompted investors to seek safe haven for their currency.
The local currency lost 8 centavos in Wednesday trade and closed at P50.60:$1, from P50.52:$1 the previous day. It was the peso’s weakest finish since settling at P50.73:$1 on September 1, 2006.
The peso opened at P50.54:$1 before trading between P50.47 and P50.60.
“The peso edged lower against the USD today along with a number of other Asean [Association of Southeast Asian Nations] currencies, likely reflecting risk-off trades as nervous international investors sought safe haven assets such as gold and the Japanese yen after North Korea’s intercontinental ballistic missile test yesterday followed by precision missile launches today by the US and South Korea into the East Sea,” IHS Markit Asia Pacific chief economist Rajiv Biswas said.
Biswas noted that North Korea’s intercontinental ballistic missile capability is further escalating tensions over the Korean peninsula, with the US increasingly concerned that North Korean missiles may eventually have the range to reach the US homeland.
“With geopolitical tensions on the Korean peninsula rising, the Korean won has moved lower, with South Korean Credit Default Swap spreads reaching a 7 week high as investors insured against default risks on South Korean debt,” he added.
The peso first touched the P50:$1 level on November 24 last year as bets on interest rate hikes in the US, which actually happened in December, favored the dollar. It depreciated by 5.35 percent against the US dollar in 2016.