The Philippine peso fell the most in three weeks and bets for wider swings increased after the central bank said it was considering measures to deal with rising capital inflows. Bonds due in 2037 snapped a six-day gain.
Governor Amando Tetangco said in Manila yesterday that policy makers were discussing non-deliverable forwards with members of the Bankers Association of the Philippines. South Korea tightened limits on the amount of currency forward positions banks are allowed to hold last week. The peso has advanced 7 percent this year, the second-best performance among Asian currencies, as investors bought the nation’s assets to benefit from its improving economy.
“The possibility of further measures to limit flows is prompting the market to pare some of their long-peso positions,” said Enrico Tanuwidjaja, an economist in Singapore at Royal Bank of Scotland Group Plc. A long position is a bet that the value of an asset will rise.
The peso dropped 0.3 percent to 40.963 per dollar in Manila, according to Tullett Prebon Plc. That’s the biggest decline since Nov. 15. The currency reached 40.840 on Nov. 29, the strongest level since March 2008. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, climbed as much as 29 basis points, or 0.29 percentage point, before erasing gains to 4.4 percent, unchanged from yesterday.
The nation’s gross domestic product rose 7.1 percent in the third quarter from a year earlier, the most in two years, official data showed last week.
The central bank ordered banks to set aside more funds to cover risks on currency forwards this year. In July, it banned foreign funds from its special-deposit accounts that pay more than government Treasury bills. It cut the overnight borrowing rate four times in 2012 to a record 3.5 percent to help reduce the appeal of the nation’s higher-yielding assets. Policy makers next meet on Dec. 13.
Forwards are agreements in which assets are bought and sold at current prices for settlement at a later specified time and date. Non-deliverable forwards are settled in dollars rather than the underlying asset.
The yield on the 6.125 percent notes due October 2037 rose four basis points to 5.59 percent in Manila, according to prices from Tradition Financial Services.