Bloomberg News

Philippine Peso Drops on Resurgent Europe Risk; Bonds Rally

May 11, 2012

The Philippine peso completed its first weekly decline in almost two months as the political impasse in Greece raised concern Europe’s debt crisis will worsen, damping demand for emerging-market assets. Bonds gained.

Asian stocks and currencies dropped this week as Greek leaders prepare to enter a fifth day of talks today to try and resolve differences over policies and form a new government. The global economic slowdown is cutting demand for Philippine exports, which contracted in March for a ninth month in a year.

“People are slowly bringing their expectations for world growth to the ground,” said Jonathan Ravelas, chief market strategist at BDO Unibank Inc. in Manila. “The problems we had in 2011 are still here. The U.S. recovery is still fragile and euro-zone concerns are still there.”

The peso fell 0.6 percent this week to 42.565 per dollar at the 4 p.m. close in Manila, and declined 0.4 percent today, prices from Tullett Prebon Plc show. One-month implied volatility, a measure of exchange-rate swings used to price options, rose 80 basis points to 5.50 percent this week and was unchanged today.

The yield on 8 percent government bonds due July 2031 fell two basis points, or 0.02 percentage point, to 5.92 percent, according to Tradition Financial Services. The rate increased three basis points this week.

Overseas sales dropped 1.2 percent from a year earlier to $4.3 billion, a report showed yesterday. The central bank will report March remittances data on March 15. Money sent home from abroad rose 5.8 percent in February from a year earlier.

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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