Philippine Peso Falls as Surprise Drop in Exports Flags Weakness

The Philippine peso fell to a one-week low after exports unexpectedly contracted in August, signaling risks to the Southeast Asian economy’s fastest expansion since 2010. Government bonds rose.

Overseas shipments declined 9 percent from a year earlier to $3.8 billion, the biggest drop this year, the National Statistics Office said in Manila today. That compares with a median estimate for a 5.5 percent gain in a Bloomberg News survey. The government may cut local borrowing next quarter given favorable demand for retail bonds currently on sale, Deputy Treasurer Eduardo Mendiola said yesterday.

“We expect exports to remain lackluster as the external environment remains fairly weak,” said Prakriti Sofat, a Singapore-based economist at Barclays Plc. “Economic growth in the second half will be much softer compared with the first two quarters.”

The peso slipped 0.2 percent to 41.547 per dollar at the close of trading in Manila, data from Tullett Prebon Plc showed. The currency will probably trade at 41.50 at year-end, Sofat forecast. One-month implied volatility, a measure of exchange-rate swings used to price options, was unchanged at 5.3 percent.

The central bank has cut its overnight borrowing rate three times this year to a record low 3.75 percent.

“Given that the inflation outlook remains benign for both this year and next, we have monetary policy space,” central bank Governor Amando Tetangco said today

The yield on the 8 percent bonds due July 2031 fell 10 basis points, or 0.10 percentage point, to 5.63 percent, the lowest level since Sept. 14, according to data from Tradition Financial Services.

The Bureau of the Treasury sold 63 billion pesos ($1.5 billion) of 6.125 percent retail bonds due 2037 yesterday. Bids totaled 76.5 billion pesos, allowing the government to sell more than twice the 30 billion pesos on offer. The sale, which runs until Oct. 22, may be capped at 100 billion pesos, Treasurer Roberto Tan said yesterday.

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