Bloomberg News

Philippine Peso Rises Most in Two Months After Central Banks Act

December 01, 2011

Dec. 1 (Bloomberg) -- The Philippine peso climbed the most in two months as regional stocks jumped after the Federal Reserve and five other central banks made it cheaper for lenders to borrow dollars. Ten-year bonds rose.

The country’s benchmark stock index gained 1.9 percent, the most since Oct. 7, after global monetary authorities agreed to reduce the interest rate on dollar-liquidity swap lines by 50 basis points. Bangko Sentral ng Pilipinas left its benchmark interest rate at 4.50 percent today, as predicted by 14 of 17 economists surveyed by Bloomberg. Three forecast a cut to 4.25 percent.

“The good news overnight boosted risk-appetite and spurred a rally in Asian markets today,” said Rafael Algarra, executive vice president at Security Bank Corp. in Manila.

The peso strengthened 0.8 percent to 43.283 per dollar as of 4:20 p.m. in Manila, its biggest gain since Sept. 28, according to Tullett Prebon Plc. The peso will probably advance to 43 before year-end, Algarra said.

The Philippines, along with India, China and Mexico will be the largest recipients of overseas remittances this year, which will rise 8.5 percent to $406 billion, according to a World Bank report. Philippine remittances climbed 8.4 percent to $1.7 billion in September from a year earlier, the central bank said Nov. 15.

”Inflows from remittances are typically strong this time of the year,” Algarra said.

The yield on the 6.375 percent January 2022 bond fell six basis points, or 0.06 percentage point, to 5.60 percent, the lowest level in more than two months, according to Tradition Financial Services.

The central bank will mainly consider the nation’s growth and inflation dynamics in deciding monetary policy, Deputy Governor Diwa Guinigundo said yesterday after Thailand cut its benchmark rate and China reduced lenders’ reserve-requirement ratio.

Bangko Sentral will probably start cutting borrowing costs by the first quarter of 2012, Algarra said.

--Editors: Andrew Janes, James Regan

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To contact the reporter on this story: Clarissa Batino at cbatino@bloomberg.net

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


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