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THE
Philippine peso fell, completing its worst quarter in
more than seven years, as record oil prices fan
inflation in the country that imports almost all its
fuel needs. Government bonds gained.
The
peso was the worst performer of the 10 most-traded
currencies in Asia outside Japan this quarter as crude
oil has doubled in the past year. The slowing global
economy, elevated commodity prices and heightened risk
aversion “have complicated monetary policy,” Philippine
central bank Governor Amando Tetangco Jr. said June 27.
“Oil
is the biggest factor in the equation, exacerbating risk
aversion in the region” and weakening the currency, said
Marcelo Ayes, senior vice president for treasury at
Rizal Commercial Banking Corp. in Manila. “Things will
definitely get worse before it gets better.”
The
peso declined 0.3 percent to P44.90 per dollar as of the
4 p.m. close of trading in Manila, according to the
Bankers Association of the Philippines. It fell 7
percent this quarter, the biggest decline since the last
three months of 2000.
The
currency may weaken to about P47 in the coming quarter
as inflation accelerates to more than 10 percent, Ayes
said.
Inflation may accelerate to as fast as 11.2 percent this
month, fanned by higher oil and food prices, wages and a
weaker peso, central bank Deputy Governor Armando
Suratos said Monday. That would be the quickest since
May 1994, based on data compiled by Bloomberg.
“We
must keep our eye on the inflation ball,” Tetangco said
before businessmen and investors in New York on June 27.
The central bank will “act preemptively to protect our
inflation target,” he said in the speech, according to a
copy e-mailed to Bloomberg Sunday. Inflation rose to a
nine-year high of 9.6 percent in May.
The
risk of the Philippines defaulting on its debt rose.
Contracts tied to the country’s dollar-denominated bonds
climbed 17 basis points to 265 basis points Monday,
prices from Barclays Capital show. The cost of
protecting $10 million of debt from default for five
years is equivalent to $265,000.
Credit-default swaps are meant to protect bondholders
should the borrower default. A higher price indicates
worsening investor perceptions of credit quality.
Five-year local-currency bonds snapped two days of
declines on optimism dividends paid out by maturing debt
will boost demand for existing securities. |
