Bloomberg News

Philippine Peso Set for Monthly Loss on Europe Woes; Bonds Gain

December 29, 2011

Dec. 29 (Bloomberg) -- The Philippine peso headed for a second monthly loss as global investors sought less risky assets such as the dollar amid Europe’s failure to resolve its debt crisis. Bonds rose on prospects for a cut in interest rates.

The MSCI Asia-Pacific Index of stocks was set for its first annual decline since 2008 on concern the financial crisis will push the world into recession. Central bank Governor Amando Tetangco said on Dec. 21 that cooling inflation and the deteriorating economic growth outlook leaves room to lower borrowing costs next year.

“The ongoing worry about the ability of European nations to pay their debt affected demand for Asian currencies,” said Rafael Algarra, executive vice president and treasurer at Security Bank Corp. in Manila. “Because growth is now more of a concern than inflation we expect a low interest-rate environment next year, which is positive for bonds.”

The peso fell 0.4 percent this month to 43.840 per dollar as of midday in Manila, according to Tullett Prebon Plc. The currency advanced 0.3 percent today and was little changed for the year. Local markets are shut tomorrow for a holiday.

The government is due to report inflation data for December on Jan. 5. Consumer prices rose 4.8 percent last month from a year earlier, slowing from a 5.2 percent gain in October.

Yields on the government’s 6.5 percent bonds due April 2021 fell 47 points, or 0.47 percentage point, to 5.135 percent this month, according to Tradition Financial Services. The rate rose one basis point today.

--Editor: Simon Harvey

To contact the reporter on this story: Karl Lester M. Yap in Manila at kyap5@bloomberg.net

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


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