The Philippine peso approached a one-week low after the central bank took steps against speculative inflows amid a global slowdown. Bonds gained.
Most of the region’s currency’s dropped today after data showed Chinese imports missed estimates, adding to concern Asia is not immune to a worldwide slowdown. The central bank said on July 7 that it was prohibiting foreign funds from investing in its special deposit accounts and may adjust banks’ reserve requirements to manage capital flows. The peso is the best-performing Asian currency this year, rising 4.5 percent.
“Because the peso has outperformed a lot of Asian currencies there’s a question here as to whether it has rallied too fast too soon,” said Sim Moh Siong, a currency strategist at Bank of Singapore Ltd. “The central bank has been coming out to warn about excessive peso strength with the latest move in the SDA deposits.”
The peso closed at 41.872 per dollar in Manila, compared with 41.855 yesterday, according to Tullett Prebon Plc. The currency touched 41.950, near 41.995 reached on July 9, the weakest level since July 2. The peso may trade between 41.50 and 42 for the rest of the week, Sim predicted.
One-month implied volatility, a measure of exchange-rate swings used to price options, increased 34 basis points, or 0.34 percentage point, to 6.54 percent.
The peso’s weakness today is in line with other currencies in the region and was also due to some extent to the new policy on special deposit accounts, central bank Governor Amando Tetangco told reporters in Manila today. “What we don’t like to see is movement caused by speculation,” he said.
The yield on the government’s 5.875 percent bonds due March 2032 slipped one basis points, or 0.01 percentage point, to 5.95 percent, according to noon fixing prices from the Philippine Dealing & Exchange Corp.