The currency touched a two-week low on Friday and the MSCI Asia-Pacific Index of regional stocks fell after China raised banks’ reserve requirements for the fifth time this year. Global funds sold $41 million more Philippine shares than they bought this week through Thursday, exchange data show.
“Everyone is risk-averse now because people are concerned that the growth story we are seeing in Asia may slow,” said Marcelo Ayes, senior vice president at Rizal Commercial Banking Corp. “We are seeing the return of the dollar.”
The peso slid 0.1 percent for the week to close at 43.14, according to
Tullett Prebon Plc. The currency touched 43.25, the weakest level since April 26.
Benchmark three-year bonds, meanwhile, fell on Friday. The yield on the 6.25 percent note due January 2014 climbed 2.5 basis points, or 0.025 percentage point, to 4.90 percent, according to Tradition Financial Services. The rate was unchanged for the week.
The Philippine Stock Exchange Index also fell—by 0.5 percent to 4,292.11, trimming the week’s gain to 1.7 percent.
Inflows from exports, remittances, outsourcing and investments buoy the peso and provide a bias “for some strengthening,” Bangko Sentral ng Pilipinas (BSP) Assistant Governor Cyd Amador said on Friday. The currency has gained 4 percent in the past year.
Money-supply growth in March quickened to 10.3 percent, data released by the BSP on Friday showed. Bank lending, excluding funds with the central bank, rose 14.1 percent in March from a year earlier, a separate data showed.
The BSP’s future action will be data-dependent and a further increase in the benchmark interest rate or a pause “are both on the table,” Amador said.
The BSP raised overnight borrowing rate by a quarter-of-a-percentage point each in the March 24 and May 5 meetings to 4.5 percent.
“We hope that with the two actions, we have sufficiently anchored inflation expectations, a key in determining inflation trends,” Amador said. “We continue to be very data-dependent. But make no mistake about it, inflation control is the top priority of the central bank.”
The Philippines joined Malaysia, India and Vietnam in raising interest rates last week to damp price pressures from higher food and oil costs. The BSP will assess in the weeks leading to its June 16 policy meeting whether risks to inflation have moderated.
“Food and energy inflation in the country tend to be persistent, have a strong pass-through impact to broader base inflation and tend to invite second-round effects,” she said.
Inflation accelerated to 4.5 percent in April from a year earlier, a 12-month high.
“The outlook constantly changes or evolves,” Amador said. Inflation is “in a state of flux,” she said.
(Bloomberg News)
