Philippine Peso Falls to One-Month Low; Bonds Drop on Inflation

The Philippine peso dropped to the lowest level in a month as comments by Federal Reserve officials fueled speculation the U.S. will pare monetary stimulus. Bonds fell before a report forecast to show inflation quickened.

Fed Bank of Dallas President Richard Fisher said in Sydney that the authority should resume normal monetary policy as soon as possible. St. Louis Fed chief James Bullard said Nov. 1 that labor-market gains in the past year may warrant a cut in bond purchases that have buoyed emerging markets. Philippine consumer prices rose 3.2 percent in October from a year earlier, the fastest pace since March, according to the median estimate of economists surveyed before a report due tomorrow.

“Recent comments suggests the Fed may start tapering as early as the first quarter, which is limiting the strength of the peso and local stocks during a period of strong remittances,” said Jonathan Ravelas, chief market strategist at BDO Unibank Inc., the nation’s largest lender by assets. “Inflation may have bottomed and, with the U.S. taper story, yields may move sideways to higher.”

The peso fell 0.2 percent to 43.305 per dollar at the close in Manila, the lowest since Oct. 2, according to prices from Tullett Prebon Plc. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose four basis points, or 0.04 percentage point, to 5.53 percent.

Remittances typically rise during the fourth quarter when Filipinos living abroad send more money home for the Christmas holidays and to pay school fees, said Ravelas, who expects the peso will trade between 43 and 43.50 until the end of the year. Cash transfers exceeded $1.9 billion each month from October to December last year, the highest levels in 2012.

Bill Sale

The yield on the 2.125 percent bond due May 2018 rose five basis points to 2.7 percent, according to Tradition Financial Services. The Philippine Stock Exchange Index fell 0.6 percent at the close.

The Bureau of the Treasury sold 17.4 billion pesos ($402 million) of bills due in three months to a year, less than the 20 billion pesos offered. The rate on 182-day bill dropped to 0.001 percent today, matching that of the 91-day notes.

Overseas investors flocked to the shorter-dated bills on expectations the peso will appreciate, Treasurer Rosalia de Leon told reporters after the auction.

Bangko Sentral ng Pilipinas in May gave individuals until the end of November to withdraw from its special deposit accounts. Funds in the accounts stood at 1.59 trillion pesos as of Oct. 11.

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