Foreign exchange dips to ₱54.13 to $1, stocks trade below 7,500

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Metro Manila (CNN Philippines, September 12) — The peso continues to depreciate against the dollar.

Trading of the currency closed at ₱54.13 versus the greenback on Wednesday, finally breaching the ₱54 mark.

It also breached a new near 13-year-low. In December 2, 2005, the peso was ₱54.15 to the dollar.

Meanwhile in the Philippine Stock Exchange, the services and mining and oil sub-indices have recovered slightly.

The rest of the sub-indices are still in the red. The stock market fell by 0.92 percent at 7,449.20, ending below the 7,500 threshold level.

Analysts point to the escalating trade war between powerful economies U.S. and China that influenced the market.

"The persistent weakness of the peso can be attributed to the strength of the U.S. dollar today, the continuing trade tensions between U.S. and China, and the emerging markets' recent turmoil (Turkey and Argentina)," said Ruben Asuncion, chief economist of Union Bank of the Philippines.

He said investors see the Philippines as possibly following the trend of other emerging markets. Turkey and Argentina are both going through economic crises.

Land Bank of the Philippines market economist Guian Dumalagan said the pending implementation of the Currency Risk Reduction Program (CRRP) by the Bangko Sentral ng Pilipinas (BSP) may temper depreciation, but it cannot fully protect the currency from global risks.

"The CRRP may just temper the deprecation of the peso, but it is unlikely to fully protect the local currency from external forces such geopolitical noise and further rate hikes from the U.S. central bank. These external forces are beyond the control of the BSP," Dumalagan said. 

As for the stock market, Regina Capital managing director Luis Limlingan said China seeking sanctions against the U.S. in the World Trade Organization (WTO) have aggravated tensions between the two nations, which in turn affected local trade.

"Philippine shares closed lower once more, mostly on renewed trade tension as China lodged permission with WTO to levy tariff on the US and crude oil rising on Hurricane & EIA WTI outlook," Limlingan said.

China is seeking sanctions against the U.S. for non-compliance to a 2016 ruling against the latter for dumping duties on Chinese exports.

Gio Perez, trader from Papa Securities, said that the depreciation of the peso could have also led a hand to today's weak trading.

"USDPHP breaking out of its psychological ₱54 resistance level (i.e. Peso depreciation) to make an intraday high of ₱54.153 may have had a hand in today's weakness," Perez said.

Perez expects weak trading in the stock market in the days to come.

"Given that the PSEi close today at its intraday low, and also below the 7,460 - 7,500 support area, watch out for further downside movement given its current momentum and the ever-present net foreign selling," Perez said.