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Philippine Peso Climbs as Central Bank Allows Gains; Bonds Rise

The Philippine peso strengthened, snapping three days of losses, as the central bank said it would tolerate gains in the currency. Bonds advanced.

Bangko Sentral ng Pilipinas Governor Amando Tetangco said in a speech in Manila today that the monetary authority would “take a pragmatic approach by allowing some appreciation in the exchange rate.” Currency gains and lower utility costs probably slowed inflation this month to 2.7 percent to 3.6 percent, Tetangco said in a mobile-phone message today. Consumer prices rose 3.9 percent in January from a year earlier. Oil prices retreated from a nine-month high reached on Feb. 24.

“Letting the peso appreciate will help authorities offset the impact of oil price increases,” said Joric Nazario, treasurer at Philippine Veterans Bank in Manila.

The peso closed 0.3 percent stronger at 42.845 per dollar, according to Tullett Prebon Plc. It touched 43.11 yesterday, the weakest level since Jan. 25. The yield on the 6.25 percent November 2016 peso bonds fell 23 basis points, or 0.23 percentage point, to 4.52 percent, according to midday fixing prices at Philippine Dealing & Exchange Corp.

The central bank cut its overnight borrowing rate to 4.25 percent from 4.5 percent on Jan. 19, the first reduction in more than two years. The next policy meeting is on March 1. Fourteen of 18 economists predict the central bank will reduce the rate to 4 percent, with three expecting it will be left unchanged. One forecast a half-a-percentage-point cut.

“The market has priced in a quarter-point cut this week and the central bank will probably pause after this,” Nazario said.

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