Bloomberg News

Philippine Peso Climbs to One-Month High on Europe; Bonds Drop

October 17, 2011

Oct. 17 (Bloomberg) -- The Philippine peso rose to a one- month high on optimism European policy makers are moving closer to containing their debt crisis, buoying demand for emerging- market assets.

The currency rallied the most this month as the benchmark stock index advanced for an eighth day. Finance chiefs from the Group of 20 nations endorsed parts of a plan to contain Europe’s debt situation in Paris over the weekend. A summit in Brussels on Oct. 23 was chosen as the deadline for an agreement. Government bonds dropped as economists predicted policy makers will leave interest rates unchanged this week to support the economy.

“The G-20 meeting outcome is lending support to risk appetite for Asian currencies,” said Gundy Cahyadi, an economist at Oversea-Chinese Banking Corp. in Singapore. “There is optimism going into the EU summit.”

The peso strengthened 0.6 percent to 43.115 per dollar as of 4:41 p.m. in Manila, according to Tullett Prebon Plc, the strongest level since Sept. 14. It has advanced 1.4 percent this month.

A central bank report today showed remittances sent home by Filipinos abroad rose 11 percent in August to $1.67 billion from a year earlier, the biggest jump since December 2009.

While emerging-market bond funds posted outflows for the fourth straight week through Oct. 14, the pace of redemptions slackened as funds investing in both local-currency and dollar- denominated securities took in fresh money, according to fund research firm EPFR Global.

Rate Decision

Bangko Sentral ng Pilipinas will keep its benchmark rate at 4.5 percent at its Oct. 20 meeting, according to all 17 economists surveyed by Bloomberg. Monetary-policy settings are appropriate and there is no compelling reason for a shift, Governor Amando Tetangco said on Oct. 15.

The yield on the 7.375 percent security maturing in March 2021 climbed four basis points, or 0.04 percentage point, to 5.79 percent, according to Tradition Financial Services. The rate dropped 59 basis points from a three-month high on Sept. 23.

“Yields have already dropped a lot in the past month and a rate cut looks unlikely for now,” said Speedy Delfino, a fixed- income trader at East West Bank Corp. in Manila. “The government would probably like to see the results from its stimulus program, plus inflation is still up there.”

President Benigno Aquino unveiled a 72 billion-peso ($1.7 billion) stimulus package of public works and poverty-reduction projects to support growth on Oct. 12. It may add 20 billion pesos to the package, Budget Secretary Butch Abad told reporters today in Manila.

--Editors: Andrew Janes, Sandy Hendry

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To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net


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