Peso dips as Trump tariff vs EU fans trade war fears

THE PESO dipped against the dollar on Thursday after US President Donald J. Trump said he would slap a 25% tariff on the European Union (EU), which vowed to counter “firmly and immediately,” fanning fears of an escalating trade war.

It closed at P57.91 a dollar, three centavos weaker than its P57.88 finish on Tuesday, according to Bankers Association of the Philippines data posted on its website.

The peso opened at P57.87 against the dollar, weakened to as much as P57.92 and strengthened to as much as P57.85. Volume fell to $1.07 billion from $1.09 billion on Tuesday.

“The peso weakened from safe-haven demand after US President Trump announced 25% tariffs for the European Union,” a trader said in an e-mail.

The US leader on Wednesday said he plans to slap cars and other goods from the European Union a 25% tariff. The EU vowed to counter “firmly and immediately.”

The dollar-peso also traded cautiously as players awaited key US data to be released overnight, including initial jobless claims and durable goods, in addition to US GDP, another trader said by telephone.

The second trader expects the peso to weaken further on Friday on expectations of an upbeat report on US durable goods.

The first trader expects the peso to trade from P57.70 to P58.10 a dollar, while the second trader sees it at P57.80 to P58.05.

The dollar firmed in Asia on Thursday and Treasury yields ticked higher as investors assessed the outlook for tariffs and the economy under Mr. Trump.

Asian stocks were weaker overall in volatile trading, with tech shares around the region getting little steer from earnings of heavyweight US chipmaker and artificial intelligence darling Nvidia.

Cryptocurrency Bitcoin languished near the $85,000 mark, while safe-haven gold steadied some $64 an ounce below its record high as trade war worries kept market sentiment fragile.

Mr. Trump clouded the outlook for looming levies on top trading partners Canada and Mexico on Wednesday by signaling they would take effect on April 2, which would be another month-long extension.

However a White House official later said the previous March 2 deadline for the levies remained in effect “as of this moment,” stirring further uncertainty about US trade policy.

US two-year Treasury yields rose to 4.09%, finding their footing after a slump to the lowest since Nov. 1 at 4.065% in the prior session. The 10-year yield rose to 4.2809% from a low of 4.245% on Wednesday, a two-and-a-half-month trough.

The dollar and US yields have been under pressure in recent weeks as a run of soft economic indicators have combined with growth worries arising from Mr. Trump’s tariff plans.

Traders have raised bets for Federal Reserve interest rate cuts in recent days, now seeing two quarter-point reductions this year, with the first likely in July and the next as early as October.

Markets will look at GDP and durable order data due on Thursday for any stronger signs of slowdown, while the Fed’s preferred inflation gauge, the personal consumption expenditure index, is due on Friday.

“Markets are starting to feel less confidence about US growth,” said Shoki Omori, chief global desk strategist at Mizuho Securities. “US data surprises will continue to be towards the downside,” although as economists start to adjust their forecasts toward weaker outcomes, and with inflation still “sticky,” 10-year Treasury yields are unlikely to fall below 4%, he added.

The dollar index, which measures the currency against six major rivals, rose 0.24% to 106.7, continuing its climb off a two-and-a-half-month low of 106.12, reached earlier this week. — Aaron Michael C. Sy with Reuters