Bloomberg News

Philippine Peso Has Weekly Drop as Capital Curbs Considered

December 07, 2012

The Philippine peso completed a weekly decline after the central bank said it was looking at measures to address rising capital inflows.

The peso rose 5.8 percent in the past year, the best performance among Asia’s 11 most-active currencies. Bangko Sentral ng Pilipinas Governor Amando Tetangco said on Dec. 3 that changes to the reserve-requirement ratio for lenders, and capital controls, may be part of possible steps to deal with inflows but won’t be necessary at this stage.

“We’ve seen comments from the BSP start to turn slightly more aggressive against inflows,” said Dominic Bunning, a foreign-exchange strategist in Hong Kong at HSBC Holdings Plc. “The market is taking that into account. Tetangco is trying to guide the market away from too many speculative positions.”

The peso fell 0.1 percent this week to 40.933 per dollar in Manila, according to Tullett Prebon Plc. The currency, which rose 0.1 percent today, reached 40.840 on Nov. 29, the strongest level since March 2008. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, was steady this week at 4.4 percent.

Tetangco said in Manila on Dec. 5 that policy makers were discussing non-deliverable forwards with members of the Bankers Association of the Philippines. South Korea tightened limits on the amount of currency-forward positions banks are allowed to hold last week.

Currency Forwards

The Philippine authority has already ordered banks to set aside more funds to cover risks on currency forwards this year. Forwards are agreements in which assets are bought and sold at current prices for settlement at a later specified time and date. Non-deliverable forwards are settled in dollars rather than the underlying asset.

The yield on the 6.125 percent notes due October 2037 dropped 11 basis points, or 0.11 percentage point, this week to 5.59 percent in Manila, according to prices from Tradition Financial Services. The rate was little changed today.

Inflation eased last month to the slowest pace since June, government data showed on Dec. 5. Consumer prices rose 2.8 percent from a year earlier after increasing 3.1 percent in October. The median forecast of economists surveyed by Bloomberg was for a 3 percent gain.

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

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


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