The Philippine peso fell for a third day and government bonds declined after U.S. data spurred speculation the Federal Reserve will rein in monetary stimulus that has bolstered demand for emerging-market assets.
The yield on Philippine bonds due 2037 was near a four-month high after U.S. payrolls rose 175,000 in May, exceeding the median forecast in a Bloomberg survey for a gain of 163,000, official data showed on June 7. The U.S. jobless rate rose to 7.6 percent last month. Federal Reserve Chairman Ben S. Bernanke said in May that the central bank’s $85 billion of monthly bond purchases may be scaled back if the U.S. employment outlook shows sustainable improvement.
“All eyes are focused on what the Fed’s going to do,” said Jan Briace Santos, a fixed-income trader who helps manage the equivalent of $18 billion at BPI Asset Management Inc in Manila. The U.S. data supported “the belief that the U.S. is on its way to a recovery,” he said.
The peso dropped 0.6 percent, the most this month, to 42.495 per dollar as of 11:08 a.m. in Manila, according to prices from Tullett Prebon Plc. The currency touched 42.625 on May 30, the lowest level since June 25, 2012. The currency has lost 3.5 percent this year.
The yield on the 6.125 percent government bonds due November 2037 advanced 10 basis points to 4.95 percent, according to prices from Tradition Financial Services. The rate reached 5 percent on June 7, the highest level since Feb. 11.
Overseas funds sold $200 million more Philippine stocks than they bought last week, reducing net purchases for the year to $1.54 billion, exchange data show.
Bangko Sentral ng Pilipinas will keep its benchmark overnight borrowing rate at a record-low 3.5 percent when policy makers meet on June 13, all 18 economists in a Bloomberg News survey predict.
The monetary authority cut the rate it pays on special deposit accounts on April 25 for the third time this year to curb capital inflows that were spurring peso gains. The currency strengthened 6.8 percent in 2012 and touched 40.55 per dollar on Jan. 14, the strongest level since March 2008.
“Monetary policy is accommodative without the currency being subject to a one-way risk,” Tim Condon, head of Asia research in Singapore at ING Groep NV, wrote in a report today. He said there was no market pressure for the central bank to reduce the SDA rate.
One-month implied volatility, a measure of expected moves in the exchange rate used to price options, declined 39 basis points, or 0.39 percentage point, today to 6.11 percent.
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