Bloomberg News

Philippine Peso Completes Sixth Weekly Gain on Growth Outlook

April 27, 2012

The Philippine peso completed a sixth weekly gain, the longest winning streak since April 2010, on speculation government spending and remittances will boost economic growth. Bonds advanced.

The Philippines reported a budget deficit in March, reversing a surplus the previous month, after the government stepped up spending to bolster the economy. Money sent home by Filipinos living abroad increased 5.8 percent in February from a year earlier to $1.6 billion, after gaining 5.4 percent in January, the central bank reported on April 16.

“It’s largely positive sentiment on the outlook for the Philippine economy,” said Joey Cuyegkeng, an economist at ING Groep NV in Manila. “The March government spending assured that we’re going to see stimulus come into play. The remittances continue to be quite resilient.”

The peso strengthened 0.6 percent this week to 42.368 per dollar at the close in Manila, according to Tullett Prebon Plc. The currency rose 0.4 percent today, the biggest gain since April 2. One-month implied volatility, which measures exchange- rate swings used to price options, fell 100 basis points this week to 4.30 percent and reached 4.08 percent yesterday, the lowest level since November 2002. It was little changed today.

The budget shortfall was 28.6 billion pesos ($674 million), compared with a previously reported 10.66 billion peso surplus for February, the government said on April 25.

The World Bank and the International Monetary Fund have forecast expansion will accelerate to 4.2 percent in 2012, aided by government spending. Growth in the $200 billion economy slowed to 3.7 percent last year from 7.6 percent in 2010.

The yield on the Philippines’ 8 percent bonds due July 2031 fell 14 basis points, or 0.14 percentage point, this week to 5.94 percent, according to prices from Tradition Financial Services. The rate was six basis points lower today.

To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net.

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


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