Bloomberg News

Philippine Peso Has Weekly Decline as Central Bank Curbs Gains

July 13, 2012

The Philippine peso completed its first weekly loss in three as the central bank took steps against speculative inflows amid a global slowdown. Bonds gained.

Bangko Sentral ng Pilipinas said on July 7 that it has tightened rules on capital inflows by limiting where foreign funds can put their money and today cut the rate on one-month special deposit accounts to 4.15625 percent from 4.1875 percent. China said today its economy expanded 7.6 percent in the second quarter, the slowest pace in three years. The peso is still the biggest gainer among the 11 most active currencies in Asia this year, rising 4.4 percent.

“The peso has strengthened a bit too far already,” said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc. in Tokyo. “In addition, China shows signs of slowing and external demand is weakening, which is also negative for the Philippines. The scope for further sharp appreciation for the peso from here is quite limited.”

The peso dropped 0.4 percent this week to 41.98 per dollar in Manila, according to Tullett Prebon Plc. The currency reached 42.162 earlier, the weakest level since June 29. It gained 0.2 percent today. One-month implied volatility, a measure of exchange-rate swings used to price options, climbed 20 basis points, or 0.20 percentage point, to 6.40 percent and rose 50 basis points this week.

The monetary authority also lowered the one-week rate on its special deposit accounts to 4.03125 percent and the two-week rate to 4.09375 percent.

Oversea-Chinese Banking Corp., the most accurate forecaster of the peso over the past six quarters, according to data compiled Bloomberg, expects a 1.5 percent decline to 42.6 per dollar by the end of December, saying the currency may have strengthened too much.

The yield on the government’s 5.875 percent bonds due March 2032 declined five basis points to 5.74 percent this week, according to prices from Tradition Financial Services. The rate slumped nine basis points, or 0.09 percentage point, today.

To contact the reporter for this story: Lilian Karunungan in Singapore at at lkarunungan@bloomberg.net.

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


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