The peso traded on a weak note against the greenback on Monday as geopolitical tensions between the United States and China erupted anew, which also prompted selling on the stock market.
The peso lost 4 centavos to settle at P49.96 to a dollar from P49.92 on Friday.
The local currency opened at P49.88:$1 on the Philippine Dealing System before trading between P49.88 and P49.97. Total volume reached $310 million, compared with $347 million Friday.
Analysts from the Bank of the Philippine Islands (BPI) and Land Bank of the Philippines pointed out that the forex market was largely driven by heavy selling on the stock market.
The PSEi fell 1.99 percent or 136.58 points to close at 6,714.13.
“We were the fourth worst performer in the world, the weakest in Asia. USD was also strong across all Asia today,” BPI Vice President and lead economist Emilio Neri Jr. said.
LandBank market economist Guian Angelo Dumalagan said safe-haven buying followed after the “squabble” between China and the US erupted over a US drone discovered in the South China.
Fresh US-China tensions occurred over the weekend after Trump lashed out via Twitter saying China stole an underwater US drone in an “unprecedented act.”
“The impact of this geopolitical issue might be temporary,” Dumalagan said.
“The peso might move sideways, as likely hawkish comments from Fed Chair Yellen might temper the impact of profit taking amid potentially softer US services data,” he said, seeing a trading range of P49.85 to P50.05 per dollar.
The peso may move sideways in general, with a slight upward bias due to profit- taking ahead of the US presidential inauguration in January, he predicted.
“Investors might be more cautious because of uncertainties about the economic programs of the next US president,” Dumalagan noted.
BPI’s Neri said the peso-dollar rate could settle at P52.50 next year if the Federal Open Market Committee delivers on its projected three rate hikes.