Bloomberg News

Philippine Peso Advances Most This Month on Inflows, Fed Minutes

August 23, 2012

The Philippine peso gained the most this month after data showed the nation’s balance of payments surged to a 20-month high and the central bank said it stands ready to act to keep the financial system stable.

Stronger fund inflows are boosting the nation’s external position, Bangko Sentral ng Pilipinas Governor Amando Tetangco said in a mobile-phone message yesterday, after official figures showed the balance of payments stood at $3.18 billion in July. The peso rose after minutes of the most recent meeting of U.S. policy makers, released yesterday, signaled they will consider more asset purchases that boost dollar supply, known as quantitative easing, unless the American economy improves.

“Much of the peso’s strength is the result of the Federal Reserve’s meeting, which boosted expectation of quantitative easing,” said Radhika Rao, an economist at Forecast Pte in Singapore. “The Philippines’ strong balance of payments in July and the governor’s comments also help.”

The peso climbed 0.4 percent to 42.115 per dollar as of 4:13 p.m in Manila, the biggest gain since July 31, Tullett Prebon Plc prices showed. It touched 42.107 earlier, the highest level since Aug. 15. One-month implied volatility, a measure of exchange-rate swings used to price options, increased three basis points, or 0.03 percentage point, to 6.23 percent.

International investors boosted holdings of Philippine stocks by $2.1 billion this year, exchange data show.

The nation reported a budget deficit of 39.2 billion pesos ($931 million), a third monthly shortfall, according to an official report released today. The government targets to cap the deficit at 279 billion pesos this year, or 2.6 percent of gross domestic product.

Bonds were little changed with the yield on the 9.125 percent debt due September 2016 holding steady at 4.4 percent, according to Tradition Financial Services.

To contact the reporter on this story: Elffie Chew in Kuala Lumpur at echew16@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net


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