Bloomberg News

Philippine Peso Weakens for Second Day on Central Bank Signal

November 13, 2012

The Philippine peso fell for a second day, after touching a four-year high last week, on concern the central bank will slow gains in the currency to support the economy. Government bonds advanced.

Bangko Sentral ng Pilipinas has been “more closely monitoring market conduct to ensure that movements in the exchange rate are not excessively volatile,” Governor Amando Tetangco said in an e-mailed reply to questions yesterday. The currency has appreciated more than 6 percent this year, the second-best performance among Asia’s 11 most-traded currencies.

The peso fell 0.1 percent to 41.113 per dollar at the close in Manila, according to Tullett Prebon Plc. It touched 41.050 on Nov. 8, the strongest level since March 2008. One-month implied volatility, which measures exchange-rate swings used to price options, was little changed at 4.7 percent.

“We have seen the BSP hold the 41.050 level firmly, signaling that it’s probably not going to allow further appreciation for the meantime,” said Alan Cayetano, head of foreign-exchange trading at Bank of the Philippine Islands in Manila, the nation’s largest lender by market capital. “There’s also some mid-month corporate demand for dollars from oil and manufacturing companies.”

Bangko Sentral has “policy space given the current level of interest rates” and it’s looking at possible refinements in the tools to manage domestic cash flows, Tetangco said in the e- mail. Businesses must find ways to boost productivity and take advantage of the lower cost of imports, he said. Coordination between monetary and fiscal authorities must be “pursued more vigorously in terms of debt management,” he added.

Asset Bubbles

Exports rose 23 percent in September from a year earlier, the fastest pace in 21 months, after falling 9 percent in August, the statistics office said in Manila today.

The expansion in overseas shipments signals demand is stabilizing, central bank Deputy Governor Diwa Guinigundo said today. The central bank won’t tolerate asset bubbles, Deputy Governor Nestor Espenilla said in a speech today in Manila.

The government may offer new bonds in exchange for less- frequently traded securities in January instead of December, Deputy Treasurer Eduardo Mendiola told reporters yesterday.

The yield on the 4.625 percent securities due July 2017 fell eight basis points, or 0.08 percentage point, to 4.03 percent, according to Tradition Financial Services.

To contact the reporter 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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