Bloomberg News

Philippine Peso Falls to 8-Month Low; Bonds Drop on Inflation

October 04, 2011

Oct. 4 (Bloomberg) -- The Philippine peso fell to an eight- month low on concern Europe’s worsening debt crisis will encourage overseas investors to pull out more funds.

The country is seeing a “partial reversal” of capital inflows, central bank Deputy Governor Diwa Guinigundo said in a mobile-phone text message today. The central bank is closely monitoring “global risk appetite” to ensure that capital flows are orderly, Governor Amando Tetangco said in an e-mail today. The government will report September inflation numbers tomorrow, a week after two typhoons hit the nation.

“Overall, the theme is risk aversion,” said Radhika Rao, an economist at Forecast Pte in Singapore. “There’s upward pressure on inflation because of the weaker peso and the series of storms.”

The currency dropped 0.2 percent to 44.075 per dollar as of the 4 p.m. close of trading in Manila, adding to a 1.2 percent loss in the last three days, according to Tullett Prebon Plc. It earlier touched 44.215, the weakest level since Feb. 1. The peso slumped 3.3 percent in September, the worst month since May 2010.

Goldman Sachs Group Inc. lowered its three-month forecast for the peso to 43 from 42, according to a research report. The currency will probably end the year around 43 to 43.30 and will be supported by remittances from overseas Filipinos, Rao said.

Consumer prices rose 4.9 percent last month from a year earlier, compared with a 4.7 percent increase in August, according to the median estimate of economists surveyed by Bloomberg News.

Government bonds fell ahead of the inflation report. The yield on the 6.5 percent April 2021 notes rose 11 basis points, or 0.11 percentage point, to 6.32 percent, based on midday fixing prices at Philippine Dealing & Exchange Corp.

The Philippines plans to sell 10- and 15-year bonds to individuals this month, Deputy Treasurer Eduardo Mendiola said yesterday. The government hired 10 banks to manage the offering, and pricing may take place on Oct. 10, he said.

--With assistance from Michael Munoz in Hong Kong. Editors: Simon Harvey

To contact the reporter on this story: Clarissa Batino in Manila at cbatino@bloomberg.net.

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net


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