The Philippine peso dropped by the most in two weeks after the central bank tightened rules on capital inflows by limiting where overseas investors can put their money. Government bonds fell.
Bangko Sentral ng Pilipinas will prohibit foreign funds from investing in its special deposit accounts, Governor Amando Tetangco told reporters on July 7 at a conference in Subic, north of Manila. Two-week and one-month special accounts, which held 1.66 trillion pesos ($39.5 billion) as of June 15, pay more than the nation’s 91-day Treasury bills. The peso reached a four-year high last week.
“Looking at the recent run-up in the peso, it would be time for the currency to give up some gains,” said Leong Sook Mei, Singapore-based regional head of global currency research at Bank of Tokyo-Mitsubishi UFJ Ltd. The rules on the SDAs “would discourage speculative flows,” she said.
The peso weakened 0.4 percent to 41.948 per dollar in Manila, the most since June 25, according to Tullett Prebon Plc. The currency reached 41.600 on July 4, the strongest level since April 2008. It strengthened 4.5 percent this year, the most among Asia’s 10 most-traded currencies.
One-month implied volatility for the peso, a measure of exchange-rate swings used to price options, increased 30 basis points, or 0.30 percentage point, to 6.20 percent.
“While the SDA is principally a tool for managing excess liquidity, it has also become a possible entry-point for foreign monies desiring to participate in the price action in the peso- dollar market,” Tetangco said.
The one-month SDA yields 4.1875 percent, while the three- month Treasury bill yield averaged 2.008 percent at the latest sale today.
The yield on the government’s 5.875 percent bonds due March 2032 climbed two basis points to 5.80 percent, according to prices from Tradition Financial Services.
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