The Philippine peso strengthened the most this year and stocks advanced after the nation’s sovereign outlook was raised by Moody’s Investors Service to positive.
The currency reversed losses as the amendment boosted odds the nation will be upgraded from Ba2, which is two levels below investment grade. A government report on May 31 may show gross domestic product increased 4.3 percent in the first quarter, the fastest pace in a year, according to the median estimate of economists surveyed by Bloomberg.
The peso is “the only regional currency showing solid gains after Moody’s raised the Philippines’ credit-rating outlook to positive,” said Dariusz Kowalczyk, a strategist at Credit Agricole CIB in Hong Kong.
The currency climbed 0.8 percent to 43.217 per dollar at the close in Manila, according to Tullett Prebon Plc. The peso has advanced 1.5 percent this year. It may gain another 1.2 percent to 42.70 by end-December, Kowalczyk predicted.
One-month implied volatility, a measure of exchange-rate swings used to price options, increased 35 basis points, or 0.35 percentage point, to 7.60 percent.
The Philippine Stock Exchange Index (PCOMP) advanced 1.4 percent to 5,023.11, the highest close since May 14.
The Southeast Asian nation reported its second monthly budget surplus this year in April. The government has said it is committed to improving finances while also increasing spending to boost expansion to as much as 8 percent annually.
President Benigno Aquino plans to narrow the budget shortfall to 2 percent of gross domestic product by 2013 from a targeted 2.6 percent this year.
“The government of the Philippines has continued to demonstrate prudence in its fiscal management, as characterized by low budget deficits relative to its rating peers and a steadily declining level of debt relative to gross domestic product,” Moody’s said in a statement today.
The yield on the Philippines’ 5.75 percent bonds due November 2021 was steady at 5.55 percent, according to prices from Tradition Financial Services.
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