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Philippine Peso Declines as Central Bank Seen Curbing Gains

The Philippine peso weakened on speculation the central bank will temper appreciation after capital inflows drove the benchmark stock index to an all-time high yesterday. Government bonds rose.

The peso halted a two-day gain after Bangko Sentral ng Pilipinas Governor Amando Tetangco said policy makers are considering taking steps, including cutting interest rates on special-deposit accounts, to ease currency pressure. The central bank last lowered rates on those accounts on Jan. 24.

“We still expect a cut in SDA rates, with room for up to a full percentage point,” said Patrick Ella, an economist in Manila at Security Bank Corp. “This move will weaken the peso.”

The peso declined 0.1 percent to 40.732 per dollar in Manila, according to data from Tullett Prebon Plc. It has climbed 0.8 percent this year. The central bank may be comfortable with a rate between 40.70 and 40.80, Ella said.

One-month implied volatility, a measure of expected exchange-rate moves used to price options, fell three basis points or 0.03 percentage point, to 3.89 percent, data compiled by Bloomberg show.

Foreign investors have pumped a net $853 million into the nation’s stocks this year, exchange data show. The Philippine Composite Index has rallied 16 percent in 2013. It lost 1.6 percent today.

The government injected 20 billion pesos ($491 million) into the central bank in 2012 to help stabilize the currency and support the economy, Finance Secretary Cesar Purisima said in an e-mailed statement on March 5.

The yield on the 5.75 percent notes due September 2032 fell one basis point to 4.79 percent, according to Tradition Financial Services. The rate has plunged 82 basis points since Dec. 31.

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