Philippine Peso Weakens as BSP Set to Manage Flows; Bonds Fall

The Philippine peso fell the most this month as the central bank studies measures to curb speculation in the currency, which is trading near a five-year high. Government bonds dropped.

Bangko Sentral ng Pilipinas “is looking at an array of instruments including reserve requirements, special-deposit accounts and a rediscounting facility, which may be changed operationally,” assistant Governor Cyd Amador said Feb 22. Imports, which increased 13 percent in December from a year earlier, will help curb volatility in the peso, she said.

“There could be tighter rules on inflows to discourage speculation,” said Antonio Espedido, treasurer at China Banking Corp. in Manila. Authorities may also take a more liberal approach on outflows, he said.

The peso declined 0.2 percent to 40.757 per dollar in Manila, data from Tullett Prebon Plc show. The currency reached 40.55 on Feb. 14 and Jan. 14, the strongest level since March 2008, and has appreciated 0.7 percent this year. One-month implied volatility, a measure of expected moves in exchange rates used to price options, was unchanged at 3.9 percent.

The central bank cut the interest rate it pays on special-deposit accounts to 3 percent from 3.5 percent last month, while keeping the benchmark overnight borrowing rate at a record-low 3.5 percent.

The yield on the 6.125 percent bonds due October 2037 rose four basis points, or 0.04 percentage point, to 4.92 percent in Manila, according to Tradition Financial Services.