Philippine Peso Falls as Weaker Asian Growth Spurs Rate-Cut View

The Philippine peso dropped, snapping a four-day gain, as the World Bank forecast the slowest Asian growth in 11 years and said regional policy makers have room to cut borrowing costs. Government bonds fell before a price-setting auction tomorrow.

Expansion in developing East Asia will probably cool to 7.2 percent this year from 8.3 percent in 2011, the Washington-based lender said in a report today. That would be the slowest pace since 2001 and lower than the 7.6 percent forecast in May. Bangko Sentral ng Pilipinas is not ruling out a further interest-rate reduction, Governor Amando Tetangco said on Oct. 5. Consumer-price gains have stayed below 4 percent since February after remaining at or above that level for all of last year, official data show.

“Another rate cut is possible given that we have tame domestic inflation coupled with a weak global outlook,” said Raul Tan, head of the balance-sheet segment at Rizal Commercial Banking Corp.’s Treasury Group in Manila.

The peso fell 0.1 percent to 41.47 per dollar as of the 4 p.m. close in Manila, prices from Tullett Prebon Plc show. The currency advanced 0.7 percent last week. One-month implied volatility, a measure of exchange-rate swings used to price options, was unchanged at 5.30 percent.

Bangko Sentral held its overnight borrowing rate at a record low 3.75 percent in September after three cuts earlier this year. Policy makers next meet to review rates on Oct. 25.

The yield on the 8 percent debt due July 2031 rose one basis point, or 0.01 percentage point, to 5.79 percent, according to midday fixing prices at Philippine Dealing & Exchange Corp. The Bureau of the Treasury will hold a price-setting auction for 25-year bonds targeting individuals at 1 p.m. in Manila tomorrow before offering at least 30 billion pesos ($723 million) of the notes from Oct. 9 to Oct. 22.

President Benigno Aquino unveiled an agreement with the Moro Islamic Liberation Front yesterday to end a four-decade insurgency. The deal will boost investments to mineral-rich Mindanao, Finance Secretary Cesar Purisima said today.

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