The Philippine peso fell to a two-week low after North Korea launched a long-range rocket in defiance of international sanctions. Four-year bonds declined.
The Philippines “strongly condemns” the launch and the communist nation must stop its “acts of provocation,” according to an e-mailed statement from the Department of Foreign Affairs. The central bank is looking at measures to help deal with rising inflows, which may include new limits on currency forwards, Governor Amando Tetangco said last week.
“We’re seeing some knee-jerk reaction caused by this geopolitical risk,” said Joric Nazario, treasurer at Philippine Veterans Bank in Manila. “The market is also a bit cautious on signals from policy makers that they may take measures to curb volatility.”
The peso fell 0.2 percent to 41.020 per dollar at the close in Manila, declining for a third day, according to Tullett Prebon Plc. It earlier touched 41.037, the lowest level since Nov. 23. One-month implied volatility, a gauge of expected moves in exchange rates used to price options, was unchanged at 4.40 percent.
Bangko Sentral ng Pilipinas will keep its benchmark overnight borrowing rate at 3.5 percent tomorrow, according to all 14 economists in a Bloomberg survey. The central bank cut the rate by a total of 1 percentage point this year to a record low. “It looks like there is less need to stimulate the economy from the monetary policy perspective,” Tetangco said on Dec. 3.
The yield on the 6.25 percent debt due November 2016 rose two basis points, or 0.02 percentage point, to 4.16 percent, according to midday fixing prices at Philippine Dealing & Exchange Corp.