Bloomberg News

Philippine Peso Halts 4-Day Rally After Faster Inflation Report

September 05, 2012

The Philippine peso fell, halting a four-day rally, and bonds dropped after inflation accelerated to the fastest pace since January.

Consumer prices rose 3.8 percent in August from a year earlier, following a 3.2 percent advance in July, the National Statistics Office reported in Manila today. That was more than the median estimate of 3.5 percent in a Bloomberg News survey. Central bank Governor Amando Tetangco said average price increases this year will be within the monetary authority’s 3 percent to 5 percent target range.

“Faster inflation tends to diminish the value of the currency, so there was some reaction in the peso,” said Raul Tan, head of the balance-sheet segment of Rizal Commercial Banking Corp. (RCB)’s Treasury Group in Manila. “It was fast enough for the current overnight rate to be maintained but not fast enough for the central bank to be overly concerned.”

The peso declined 0.2 percent to 41.978 per dollar at the close of trading in Manila, data from Tullett Prebon Plc showed. One-month implied volatility, which measures exchange-rate swings used to price options, was unchanged at 5.7 percent.

The yield on the 11.875 percent bonds due August 2015 rose two basis points, or 0.02 percentage point, to 4.04 percent, according to a midday fixing at Philippine Dealing & Exchange Corp.

“The inflation path is largely expected to continue being well-behaved,” Tetangco said in a mobile-phone message today. “The stance of policy therefore remains appropriate.”

Bangko Sentral ng Pilipinas cut the benchmark overnight borrowing rate for a third time this year in July to a record- low 3.75 percent. The next meeting is due Sept. 13.

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

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net.


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