Bloomberg News

Philippine Peso Drops Most in 18 Months on Europe: Manila Mover

May 16, 2012

The Philippine peso fell by the most in 18 months as Europe’s worsening debt crisis damped demand for higher-yielding emerging-market assets. Bonds dropped.

The benchmark share index has lost more than 7 percent since May 8 as the possibility of Greece leaving the euro and a territorial dispute between the Philippines and China reduced investor appetite for local equities. Money sent home by overseas workers rose 5 percent in March from a year earlier, the least in 12 months, the central bank reported yesterday.

“The Greek impasse is hurting sentiment and the tension with China is taking its toll on the stock market, coupled with broader profit-taking,” said Radhika Rao, an economist at Forecast Pte in Singapore. “Uncertainties in the external environment may also affect hiring and remittances, the growth pace of which has slowed.”

The peso fell 0.9 percent to 43.040 per dollar at the close in Manila, the most since November 2010, data from Tullett Prebon Plc showed. It touched 43.080, the weakest level since March 23. One-month implied volatility, which measures exchange- rate swings used to price options, rose 25 basis points, to 6.75 percent.

Tensions between China and the Philippines have risen since a standoff began last month between ships from both countries over an island in the South China Sea. China’s Xinhua News Agency reported last week that Ctrip.com, the country’s largest online travel company, and Beijing Caissa International Travel Service Co. halted tours to the Southeast Asian nation.

The yield on the 5.875 percent March 2032 peso bond rose seven basis points, or 0.07 percentage point, to 6.22 percent, according to midday fixing prices at Philippine Dealing & Exchange Corp.

Inflation may cool this year and next after the government cut fares for jeepneys, a common form of Philippine transport, central bank Deputy Governor Diwa Guinigundo said yesterday. Consumer prices rose 3 percent in April from a year earlier, accelerating from a 30-month low.

To contact the reporters on this story: Clarissa Batino at cbatino@bloomberg.net

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


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