The Philippine peso retreated from a three-week high after the Federal Reserve signaled it will hold off from further monetary easing, curbing investor appetite for emerging-market assets.
The currency had its biggest drop in two weeks ahead of the Lenten holidays, when markets will shut on April 5 and 6. The minutes of the Fed’s March 13 meeting showed decreased urgency to add stimulus unless the U.S. economy falters or inflation slips below 2 percent.
“The Fed sparked a little bit of risk aversion,” said Enrico Tanuwidjaja, a Singapore-based senior currency analyst at Malayan Banking Bhd. “If there was more easing, the amount of liquidity would have been supportive of a further rally in emerging markets.”
The peso fell 0.3 percent to 42.798 per dollar at the close in Manila, paring this week’s gain to 0.3 percent, according to Tullett Prebon Plc. It reached 42.550 yesterday, the strongest level since March 13. The peso’s one-month implied volatility, which measures exchange-rate swings used to price options, declined 20 basis points to 5.70 percent.
The yield on the Philippines’ 5 percent bonds due August 2018 dropped five basis points, or 0.05 percentage point, to 4.85 percent, according to prices from Tradition Financial Services.
Inflation slowed to 2.6 percent in March from a year earlier, the least since September 2009, the National Statistics Office in Manila said today. That compares with 2.7 percent in February. The median estimate of economists in a Bloomberg News survey was for a 2.8 percent gain.
“The risk is still on the upside for inflation,” said Tanuwidjaja. Consumer-price gains may quicken in the coming months after the government approved an increase in fares for public transport, he said.