Philippine Peso Drops as Payments Surplus, Reserve Targets Cut

The Philippine peso fell as the central bank lowered forecasts for the balance of payments and international reserves due to the slowing global economy.

The surplus in its external accounts position will probably come in at $2.6 billion this year, compared with the initial estimate of $2.8 billion, Governor Amando Tetangco said yesterday. He predicted reserves of $77.5 billion to $78 billion in 2012, from the prior forecast of $79 billion.

“The weakness is more due to near-term demand for the greenback and the outlook that the dollar is relatively cheap against the peso,” said Jonathan Ravelas, chief market strategist at Manila-based BDO Unibank Inc., the nation’s largest lender. The currency will probably trade between 42.15 and 42.50 per dollar in the “near term,” he said.

The peso dropped 0.1 percent to 42.292 per dollar at the close in Manila, data from Tullett Prebon Plc showed. One-month implied volatility, which measures exchange-rate swings used to price options, was unchanged at 6.5 percent and is down from 7.75 percent at the end of last month.

The central bank reported today a $138 million surplus in the balance of payments for May, giving a five-month excess of $1.3 billion. That compares with a surplus of $4.8 billion in the same period last year.

Bond Auction

The currency posted its biggest advance in more than three years last week and climbed to a 10-month high yesterday on mounting speculation the country will win a credit-rating upgrade and as economic growth gathers pace. The peso is “giving up some gains” after the rally, said Enrico Tanuwidjaja, a Singapore-based senior currency analyst at Malayan Banking Bhd.

The Bureau of the Treasury sold 6.7 billion pesos ($158 million) of 20-year bonds today, less than the 9 billion pesos on offer, as it sought to cap borrowing costs. The 5.875 percent securities due in February 2032 were issued at an average yield of 6.024 percent, compared with 5.906 percent at a sale of similar-maturity notes in January.

In secondary market trading, the yield rose seven basis points, or 0.07 percentage point, to 6.02 percent, according to Tradition Financial Services.

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