Bloomberg News

Philippine Peso Declines on Plans to Stem Speculative Capital

July 06, 2012

The Philippine peso fell, paring its weekly gain, after the central bank said it’s considering measures to discourage speculative capital from overseas.

Bangko Sentral ng Pilipinas is reviewing guidelines on special deposit accounts to ensure only local investors have access to them, Deputy Governor Nestor Espenilla said yesterday. Inflows via non-deliverable peso forwards are being monitored as “possible points of entry of speculative activity,” central bank Governor Amando Tetangco said in an e-mail on July 3. The currency reached a four-year high on July 4 and has advanced almost 5 percent this year.

There’s been “a string of cautionary comments by BSP,” said Radhika Rao, an economist at Forecast Pte in Singapore. “Strong gains in the peso add to the exporting community’s woes and erode overseas Filipinos’ earnings.”

The peso fell 0.3 percent to 41.792 per dollar at the close in Manila, data from Tullett Prebon showed. The currency strengthened 0.9 percent this week. One-month implied volatility, a measure of exchange-rate swings used to price options, dropped 10 basis points, or 0.10 percentage point, to 5.9 percent.

Two-week and one-month special accounts pay more than the 91-day Treasury bills.

Government bonds climbed after inflation slowed last month and Tetangco said yesterday the central bank will ensure targets of 3 percent to 5 percent for this year and next “are not breached.” Consumer prices rose 2.8 percent in June, slowing from 2.9 percent the previous month, official data show.

The yield on the 7.375 percent notes due March 2021 fell three basis points to 5.10 percent, the lowest level since March 12, data from Tradition Financial Services showed. The rate declined 13 basis points, or 0.13 percentage point, this week.

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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