Philippine Peso Weakens After Intervention; Bonds Little Changed

The Philippine peso declined the most in more than a week after its rally to an almost five-year high this week prompted the central bank to intervene.

Bangko Sentral ng Pilipinas participated in the market to restrain the currency and is focused on containing speculative inflows that could potentially create asset-price bubbles, Governor Amando Tetangco said yesterday. Policy makers will keep the exchange rate market-determined and aren’t targeting any specific level, he said. The peso touched 40.55 per dollar on Jan. 14, the strongest level since March 2008, according to prices from from Tullett Prebon Plc.

“There might be some tweaking of policy variables to slow down the strengthening of the peso,” said Emilio Neri, an economist at Bank of the Philippine Islands in Manila.

The peso fell 0.2 percent to 40.628 per dollar at the close in Manila, data from Tullett Prebon show. One-month implied volatility, a measure of expected moves in exchange rates used to price options, was unchanged at 4 percent.

“Those macro prudential measures will come,” central bank Deputy Governor Diwa Guinigundo said in an interview yesterday. “We will continue to review our policy toolkit and see what else can be considered. We still have several aces up our sleeves.”

The monetary authority approved limits on currency forwards last month, a year after it ordered lenders to provide more cash to cover risks on such contracts. It banned foreign funds from its special deposit accounts in July to slow inflows. The government will curb fluctuations in the exchange rate and will consider borrowing dollars onshore to temper the peso’s rise, President Benigno Aquino said today in Cebu.

The yield on the 8 percent bonds due March 2031 was little changed at 5.49 percent in Manila, according to Tradition Financial Services.

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