Philippine Peso Falls From 3-Month High as Gains Seen Excessive

The Philippine peso dropped the most this month, after touching a three-month high earlier, as a technical indicator signaled recent gains were excessive.

The currency rose 1.9 percent against the dollar last week, the best performance in a year, as the Federal Reserve decided not to taper stimulus that has fueled demand for emerging-market assets. The dollar’s 14-day relative-strength index against the peso reached 28 on Sept. 19 and 20, below the 30 level that some investors see as an indication the greenback will rally.

The peso fell 0.5 percent to 43.263 per dollar, the most since Aug. 28, in Manila, data from Tullett Prebon Plc show. It touched 43.01 today, the strongest since June 18, and has gained 3.1 percent this month.

“A correction is warranted,” said Jonathan Ravelas, chief market strategist at BDO Unibank Inc. (BDO) in Manila. “It’s now the uncertainty on when the taper will happen.”

The Philippines is prepared for a possible reduction of the Fed’s $85 billion a month of debt purchases, central bank Deputy Governor Diwa Guinigundo said over the weekend.

“We can ride out any turbulence as we have policy tools in our hand that we can deploy anytime,” Guinigundo said in a briefing in Manila on Sept. 21. The measures include boosting dollar and peso liquidity, careful surveillance of risk, use of forward guidance, tapping currency-swap agreements and possible tightening of monetary policy, he said.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, slid 20 basis points, or 0.20 percentage point, to 5.96 percent.

The yield on the 8 percent sovereign bonds due July 2031 climbed six basis points to 4.78 percent, 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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