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Philippine Peso Weakens on Europe’s Debt Crisis; Bonds Rise

October 20, 2011

Oct. 20 (Bloomberg) -- The Philippine peso fell as division among European leaders over how to resolve the region’s debt crisis bolstered demand for dollars and deterred risk-taking. Five-year bonds rose before a central bank rate review.

Bangko Sentral ng Pilipinas kept its overnight borrowing rate at 4.50 percent following a rate review today. All 17 economists in a Bloomberg survey predicted the outcome, which was announced after the close of local trading. The inflation outlook is “slightly tilted to the downside” and latest forecasts show the target of 3 percent to 5 percent until 2013 will be met, Governor Amando Tetangco said in a statement.

“The E.U. summit may not yield great results and thus could disappoint, pushing the dollar higher,” said Enrico Tanuwidjaja, a currency strategist at Malayan Banking Bhd. in Singapore.

The peso declined 0.4 percent to 43.32 per dollar as of the close in Manila, according to Tullett Prebon Plc. The yield on the 9.125 percent bonds due September 2016 fell four basis points, or 0.04 percentage point, to 4.80 percent, according to Tradition Financial Services.

A French-German split over Europe’s rescue strategy emerged as finance ministers prepare to meet in Brussels tomorrow under pressure to craft a solution to the region’s debt crisis.

Philippine inflation will likely average 4.46 percent this year, 3.05 percent in 2012 and 3 percent in 2013, central bank Deputy Governor Diwa Guinigundo said in Manila. Monthly inflation this year won’t exceed 5 percent, he said. Liquidity growth of 9 percent to 10 percent is “just right,” Guinigundo said.

The nation’s monetary policy remains appropriate, Tetangco told reporters after the rate decision.

“The market perceives the policy stance to be neutral and will probably assume that the key rate will be unchanged for the rest of the year,” said Bunny Bernardo-Recto, vice president at Manila-based Chinatrust Philippines Commercial Bank Corp. The central bank’s final policy meeting for this year will be on Dec. 1.

--With assistance from Clarissa Batino in Manila. Editors: James Regan, Ven Ram

To contact the reporter on this story: David Yong in Singapore at

To contact the editor responsible for this story: James Regan at

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