The closed lower Friday its biggest monthly drop since August as investors seek shelter in the dollar amid uncertainty over the outcome of the nation’s presidential elections on May 9.
Government bonds were set for their worst rout in a year as 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,” Elfren Antonio Sarte, president of Robinsons Bank, a unit of JG Summit Holdings, said by phone. “The peso will continue to fluctuate.”
The peso fell to 46.89 Friday from 46.77 the other day and was down nearly 2 percent from this month, prices from the Bankers Association of the Philippines show. That would be its largest monthly decline since it slid 2.1 percent in August and the worst performance in Asia.
Yields on five-year sovereign peso-denominated bonds jumped 12 basis points Friday to 3.92 percent, and up from 3.46 percent at the end of March, according to fixing prices from the Philippine Dealing & Exchange Corp. The 43 basis point increase in April is the biggest in a year.
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. If these locals are getting more concerned, this could translate to more significant worries among foreign investors,” Euben Paracuelles, economist at Nomura Holdings Inc. in Singapore, said in a note. “We think a rising likelihood of a Duterte win could add to expectations of an adverse market reaction.”
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 did not 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 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.