The Philippine peso plunged by its steepest margin in three weeks as the market bet that investors had rushed to gain from the currency’s recent advances to purchase dollars.
The peso plunged 0.4 percent to trade at 44.462 per dollar in Manila, based on data obtained from Tullett Prebon Plc. The currency had earlier hit a level of 44.26 on April 11, its strongest since January 3. The peso also gained 1.5 percent in the past week, its highest five-day advance since the trading period closed on September 20.
Philippines central bank’s Deputy Governor Diwa Guinigundo said on April 12 that probability that U.S. and other richer nations will hike their interest rates will lead to fund outflows and weaken the peso. He also hinted that the country’s all-time low benchmark borrowing cost of 3.5 percent “isn’t sacred”
Philippines forecasts its economy to grow at 6.5 percent to 7.5 percent in 2014, according to its National Economic and Development Authority. The country will close its local markets on April 17-20 for the Easter holidays.
“Some people feel that, in line with rising U.S. interest rates, the current peso rate close to 44 is already an opportunity to buy dollars,” Jonathan Ravelas, a Manila-based chief market strategist at BDO Unibank Inc told Bloomberg. “Some are staying defensive before the holidays.”
The Bureau of Treasury disclosed on Monday that the country’s budget deficit shrunk to 9.7 billion pesos ($218 million) in February, down from 34.2 billion pesos a month earlier.
The one-month implied volatility, which measures the expected shifts in the exchange rate that assigns prices to options, fell, 0.12 percentage points, or 12 basis points to 4.94 percent.
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