Peso weakest in 5 months

MANILA, Philippines - The peso slid to its weakest level against the dollar in nearly five months yesterday as investors continued to worry on geopolitical tensions on the North Korean peninsula coupled by weak economic data coming from the US.

The local unit closed 41.27 against the dollar, 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.

 â€œThis 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 yesterday.

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 yesterday that North Korea is preparing for a fourth nuclear test this week. This was, however, later on denied by the South’s Defense Ministry.

The two announcements were followed by North Korea recalling all of 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 it added 88,000 jobs last month, weaker than the more 200,000 jobs in February. It 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 dollar –a safe haven – at the spark of uncertainty, which in this case refers to peace in Korea and growth in the US.

The 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 yesterday.

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.

 â€œThis caused the peso to weaken toward the 41.295- to $1 level. With the break above the 41.24 level, this puts the 41.50 levels (versus the dollar) at risk,” Ravelas explained.