Philippine Peso Drops in April on Presidential Election Jitters

  • Currency in biggest monthly slide since August before May vote
  • Prospect of Duterte presidency worrying investors: Nomura

The Philippine peso completed its biggest monthly drop since August as investors sought shelter in the dollar amid uncertainty over the outcome of the nation’s presidential elections on May 9.

Investor concern deepened after recent opinion polls showed candidates with no track record in business or economics widened their lead over contenders that analysts have said would best steer the Philippine economy.

“There’s already a big component of the upcoming elections in the behavior of our foreign-exchange market,” said Elfren Antonio Sarte, president of Robinsons Bank, a unit of JG Summit Holdings in Manila. “The peso will continue to fluctuate.”

The peso closed at 46.885 per dollar in Manila, down 1.7 percent this month, prices from the Bankers Association of the Philippines show. That’s the largest monthly decline since it slid 2.1 percent in August and the worst performance in Asia. It’s down 0.3 percent from Thursday.

The yield on five-year peso-denominated sovereign bonds fell six basis points in April to 3.40 percent, and was little changed on Friday, according to fixing prices from the Philippine Dealing & Exchange Corp. It dropped 66 basis points in March.

Worried Markets

Opinion polls have showed Rodrigo Duterte, the controversial Davao city mayor who made inflammatory remarks on rape and extra-judicial killing, widened his lead in the presidential race.

“We sensed local market participants have indeed become more worried of the prospect of a Duterte presidency,” Euben Paracuelles, an economist at Nomura Holdings Inc. in Singapore, said in a note. “If these locals are getting more concerned, this could translate to more significant worries among foreign investors. We think a rising likelihood of a Duterte win could add to expectations of an adverse market reaction.”

Nomura is poised to exit bets that the peso will appreciate against the dollar amid increasing concern that the election won’t have a “benign outcome,” the Japanese brokerage said in a separate report issued Thursday.

Duterte’s spokesman has sought to calm market jitters by saying uncertainty usually arises in the weeks before an election, and it will be “business as usual” should the mayor be elected president. The front-runner will provide businesses the “right and proper atmosphere” to prosper without sacrificing the welfare of the people, Peter Lavina said in a statement Tuesday.

Bangko Sentral ng Pilipinas Governor Amando Tetangco on Thursday said he doesn’t expect any major developments that would necessitate a shift in the central bank’s policy stance. The monetary authority will continue to monitor possible inflation pressures to ensure price stability is conducive to a balanced and sustainable economic growth. He forecast April inflation to be in a range of 0.7 percent to 1.5 percent year-on-year.

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