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The Philippine peso retreated from a four-year high after the central bank pledged to curb excessive volatility in the currency. Government bonds advanced.
The peso snapped a six-day gain after Bangko Sentral ng Pilipinas Governor Amando Tetangco said in an e-mailed reply to questions yesterday that the monetary authority is “watchful for signs the speculative part is not overtaking the fundamental flows.” The economy, while supported by state spending, agriculture and services sectors, is not immune to risks posed by a sputtering U.S. recovery, Europe’s debt crisis and China’s slowdown, Tetangco said in a speech today.
“The central bank is on top of the situation and authorities are monitoring the flows,” said Lito Mercado, head of trading at Rizal Commercial Banking Corp. in Manila. “These are good levels for importers to buy dollars as well.”
The peso fell 0.1 percent to 41.750 per dollar at the noon trading break in Manila after rising as much as 0.3 percent earlier, data from Tullett Prebon showed. It touched 41.600, the strongest level since April 2008. One-month implied volatility, a measure of exchange-rate swings used to price options, fell 10 basis points to 6.0 percent.
Non-deliverable forwards and the central bank’s special deposit accounts “are possible points of entry into our domestic market for foreign investors to participate in speculative activity versus the peso,” Tetangco wrote in his e- mail. “We are monitoring these flows to see if there is a need to institute any changes in the manner in which these instruments are traded.”
The monetary authority had ordered lenders starting this year to set aside more funds to cover currency-forward transactions to reduce systemic risk and curb speculation. Its two-week and one-month special accounts pay more than the 91-day Treasury bills.
Second-quarter growth was probably faster than the 6.4 percent expansion recorded in the previous three months on better farm output and higher government spending, presidential spokesman Ricky Carandang said this week. Inflation may slow for a second month, to 2.8 percent in June from a year earlier, according to the median estimate of economists in a Bloomberg News survey before the data due tomorrow.
The yield on the 6.5 percent bonds due April 2021 fell six basis points, or 0.06 percentage point, to 5.21 percent, according to Tradition Financial Services.
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