Peso flirts with P54:$1 on trade war, inflation worries

The Philippine peso is flirting with the 54-to-$1 level in early trading on Friday, weighed by the trade tension between the US and China and the nine-year high inflation in August.

The local currency hit an intra-day low of P53.975:$1, or 2.5 centavos short of P54.

The last time the peso touched the 54-to-a dollar level was on Dec. 2, 2005—at 54.155.

It depreciated against the dollar for the third consecutive trading day on Thursday, September 6,  to close its worst level in nearly 13 years.

“The peso’s decline is due to safe haven buying due to possible imposition of new US tariffs on Chinese goods as well as concerns about elevated Philippine inflation,” Land Bank of the Philippines market economist Guian Angelo Dumalagan said.

Inflation clocked in at 6.4 percent in August, the fastest in over nine years since in came in at 6.6 percent in March 2009. 

Presidential spokesperson Harry Roque said it was a “natural consequence” of  goods imports for the government’s infrastructure program.

“‘Yan ay dahil po sa ating mga programa lalo na ang Build, Build, Build na marami talaga tayo ini-import sa mega construction projects natin,” Roque told reporters at a press conference in Jordan.

“That’s a natural consequence, because we are allotting for the first time the biggest bulk of the budget towards public infrastructure,” he said. 

“Pero that’s not a reason to worry ... Ultimately, in the long run, ang tingin namin 'yung trabaho at negosyo magi-generate ng Build, Build, Build will make up for the weaker peso.”

Roque noted peso will bounce back later this year due to strong remittance inflows. 

“Traditionally, the peso becomes strongest in December because of the remittances. Hindi po magtatagal ‘yan dahil ‘ber’ months na tayo. As soon as the remittances come in for December, tataas po muli ang peso. Makikita po natin lahat ‘yan. Tried and tested po ‘yan,” he said.

As for inflation, Roque noted higher higher inflation rates were posted during previous administrations.

“Hindi po ito unprecedented in our history. It’s not a reason to have any sort of panic. It’s not that we are ignoring it. We are addressing it, kaya lang hindi naman overnight ang resulta ng anti-inflationary measures na ginagawa ng gobyerno,” he said.

On the global front, nerves were frayed as the public comment period for proposed tariffs on an additional $200 billion worth of Chinese imports ends at 0400 GMT, and the tariffs could go into effect shortly afterward, a report by Reuters said. 

China has warned of retaliation if Washington implements any new measures. —With a report by Virgil Lopez/VDS, GMA News