Peso slides amid NoKor tensions, weak US jobs report

MANILA, Philippines - The peso slid on Monday to its weakest level versus the dollar in nearly five months as investors continued to worry about geopolitical tensions in North Korea coupled by weak data coming from the United States.

The local unit closed 41.27 against the greenback, losing 11 centavos from 41.16 last Friday. It was the peso’s weakest close since Nov. 16 last year when it ended trading at 41.33.

Dollars traded amounted to $859.80 million, lower than Friday’s $1.11 billion.

“This is still driven by risk aversion from tensions in the Korean Peninsula,” said Jonathan Ravelas, chief market strategist at BDO Unibank Inc., in a phone interview.

A trader at a local bank agreed, adding that “at the same time, there was also some market reaction to the weaker-than-expected data coming from the US” last week. 

The South Korean Unification Ministry— in charge of coordination between the two Koreas— was reported as saying that North Korea is preparing for a fourth nuclear test this week. This was later on denied by the South’s Defense Ministry.

The two announcements were followed by the hermit kingdom’s recalling of all its workers in the joint Kaesong industrial complex after shutting it down to South Korean employees last week.

On the other hand, the US reported late Friday that it added 88,000 jobs last month, weaker than the more 200,000 jobs in February. It, nonetheless, said unemployment rate dipped to 7.6 percent from 7.7 percent due to lower labor force. 

Investors usually sell their foreign currency holdings and return to the US dollar— a safe haven— at the spark of uncertainty, which in this case refers to peace in Korea and growth in the US. 

The Philippine peso is among the currencies considered risky, which also tracked the weakness posted by the Japanese yen, Ravelas pointed out. The yen dropped to a five-year low versus the dollar on Monday.

The market continues to react to the Bank of Japan’s announcement last week that it will keep interest rates low and will flood the economy with money to fight the fall on consumer prices which stops consumers from spending.

While such report may mean the central bank is focused on boosting growth, investors worried of lower returns— due to lesser interest— shied away from the yen and other Asian currencies.

“This caused the peso to weaken toward the 41.295-level. With the break above the 41.24 level, this puts the 41.50 levels (versus the dollar) at risk,” Ravelas said.

Trading is suspended on Tuesday due to a regular holiday. For Wednesday, the trader expects the peso to move between 41.10 and 41.40 versus the dollar. Ravelas projects a 41.15-41.30 range.