The peso fell by the most in three weeks after Federal Reserve minutes showed there is a debate about its bond-buying program that boosts the supply of dollars. Local-currency government bonds advanced.
Several Fed policy makers said the monetary authority should be ready to vary the pace of the $85 billion of debt purchases a month, according to minutes of the Federal Open Market Committee’s Jan. 29-30 meeting released yesterday. Bangko Sentral ng Pilipinas Governor Amando Tetangco reiterated this week authorities are prepared to implement more measures to curb capital inflows.
“There’s speculation the Fed may start looking at ending monetary easing sooner than previously indicated,” said Jonathan Ravelas, Manila-based chief market strategist at BDO Unibank Inc., the nation’s largest lender.
The peso declined 0.1 percent to 40.71 per dollar at the close in Manila, the most since Feb. 5, according to Tullett Prebon Plc. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose five basis points to 3.9 percent.
There is room to further refine the central bank’s special- deposit accounts to make sure they are used as a liquidity management tool and not an investment outlet, Tetangco said on Feb. 15. The central bank cut the rate it pays on about $42 billion in the special accounts to 3 percent from more than 3.5 on Jan. 24, which has resulted in inflows into sovereign debt.
The yield on the 4.125 percent peso bonds due November 2017 fell eight basis points, or 0.08 percentage point, to 3.33 percent, the lowest level since the debt was sold in November, according to Tradition Financial Services.
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