Philippine Peso Drops Most Since August as Yen Falls; Bonds Gain

The Philippine peso slid the most in almost nine months, tracking losses in Asian currencies, as the yen’s drop to beyond 101 per dollar for the first time in four years threatened regional exports.

The Bank of Japan’s stimulus policies to fight deflation have weakened the yen 15 percent against the dollar this year. Foreign investors sold $1 million more local stocks than they bought yesterday, compared with a $14 million daily average inflow over the past month, exchange data show. The Philippines will hold elections for all local posts, the House of Representatives and half of the 24-member Senate on May 13.

“The yen’s drop was a regional currency trigger,” said Emilio Neri, an economist at Bank of the Philippine Islands. “Inflows aren’t as aggressive, as people want to observe what happens during the elections.”

The peso fell 0.7 percent to 41.13 per dollar as of the 4 p.m. close in Manila, its biggest decline since Aug. 15, 2012, data from Tullett Prebon Plc show. It dropped 0.6 percent this week. One-month implied volatility, a measure of expected moves in exchange rates used to price options, rose 15 basis points to 4.26 percent and fell 45 basis points this week.

The Bloomberg-JPMorgan Asia Dollar Index, tracking the region’s most-traded currencies excluding the yen, declined to its lowest level this month.

Bangko Sentral ng Pilipinas stands ready to deploy measures to avert asset bubbles, Assistant Governor Cyd Amador said in a briefing today. Policy makers will remain watchful of prices and economic growth to ensure policy settings are appropriate, she said.

The Philippines may sell dollar bonds locally to refinance existing debt, Finance Secretary Cesar Purisima said yesterday. Local financial markets will be shut on Monday for a holiday.

The yield on the 8 percent notes due July 2031 fell two basis points, or 0.02 percentage point, to 3.70 percent in Manila, according to Tradition Financial Services. The yield rose six basis points this week.

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