Philippine Peso Halts Four-Day Slide as Losses Judged Excessive

The Philippine peso snapped a four-day slide after investors judged its decline to a one-year low was excessive. Government bonds fell.

The currency dropped below the 43 per dollar level this week for the first time in a year and touched 43.295 today, the weakest since June 8, 2012. The dollar’s 14-day relative strength index against the peso was above 70 for the fourth day, a threshold that signals the greenback may weaken, data compiled by Bloomberg show. Foreign funds have sold $217 million more Philippine stocks than they bought this month on concerns U.S. policy makers will cut stimulus, reducing the supply of dollars.

“This is a pause on the peso’s depreciation trend,” said Jonathan Ravelas, chief market strategist at Manila-based BDO Unibank Inc. (BDO) “A weaker peso should be in the best interest of the Philippines” as it increases the value of remittances by Filipinos working overseas, he said.

The peso climbed 0.3 percent to 43.10 per dollar, according to Tullett Prebon Plc data. The currency has lost 4.7 percent this year after appreciating 6.8 percent in 2012.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, increased 12 basis points, or 0.12 percentage point, to 8.83 percent, the highest level since November 2011.

The central bank today kept its benchmark overnight borrowing rate unchanged at 3.5 percent and refrained from changing the 2 percent rate on its special-deposit accounts.

The yield on the 8 percent government bonds due July 2031 climbed 15 basis points to 4.75 percent, the highest level since February, according to prices from Tradition Financial Services.

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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