Bloomberg News

Philippine Peso Drops From One-Week High on Exports; Bonds Gain

November 23, 2011

Nov. 23 (Bloomberg) -- The Philippine peso weakened for the first time in five days after the U.S. lowered its estimate of third-quarter economic growth, fanning concern a global slowdown will hurt exports. Bonds advanced.

The currency retreated from a one-week high as the MSCI Asia-Pacific Index of stocks sank to its lowest level in more than a month amid concern Europe’s debt crisis is worsening. U.S. gross domestic product climbed at a 2 percent annualized rate last quarter from the preceding three months, less than a previous assessment of 2.5 percent, data showed yesterday. The U.S. was the Philippines’ second-largest overseas market in 2010.

“Exports are suffering with the headwinds from the U.S. and Europe in the short-term,” said Marc Bautista, head of research at Metropolitan Bank & Trust Co. in Manila. “There is still going to be growth but probably not as strong as previously expected.”

The peso dropped 0.5 percent to 43.465 per dollar as of 4:50 p.m. in Manila, according to Tullett Prebon Plc., paring its advance this quarter to 0.6 percent. It touched 43.20 today, the strongest level since Nov. 14. The currency may still rise to 42.50 by year-end, aided by remittances from overseas workers, Bautista said.

Exports slumped 27 percent in September from a year earlier, the biggest drop since April 2009, a Nov. 10 report showed. The government cut its 2011 economic growth forecast last month to as little as 4.5 percent from a range of 5 percent to 6 percent.

Bonds Advance

Government bonds advanced, keeping 20-year yields near a one-month low on optimism slower economic growth and easing inflation will fuel demand for debt.

The yield on the government’s 8 percent bond due July 2031 fell two basis points, or 0.02 percentage point, to 6.86 percent, according to Tradition Financial Services. The rate has declined 114 basis points since the notes were sold in July.

While inflation quickened to 5.2 percent in October from 4.8 percent in September, the move was exaggerated by food-price increases due to typhoon shocks, according to Jun Trinidad, an economist in Manila at Citigroup Inc.

“Price pressures are easing and the trend is for disinflation” going forward, he said in a phone interview.

--Editors: Andrew Janes, James Regan

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To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net

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


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