Bloomberg News

Philippine Peso Advances for Fourth Day on Inflows; Bonds Steady

November 22, 2012

The Philippine peso strengthened for a fourth day after foreign funds pumped money into the nation’s stocks on speculation the central bank will cut borrowing costs next month as inflation slows. Government bonds were steady.

The currency traded near the strongest level in more than four years after overseas investors bought $146 million more shares than they sold yesterday, the most in four months, exchange data show. The Philippine Composite Index of equities rose to an all-time high. Financial losses incurred by the central bank may hinder its capacity to prevent further gains in the peso before year-end, according to Bank of America Corp.

“The inflows are underpinning the strength of the stock market and the peso,” said Ghia Yuson, an analyst at First Metro Securities Brokerage Corp. in Manila. “The year-end is a seasonally strong period in remittances” from overseas citizens, she said.

The peso advanced 0.2 percent to 41.073 per dollar at the close in Manila, according to data from Tullett Prebon Plc. The currency has appreciated 0.6 percent this week. It touched 41.050 on Nov. 8, a level last seen in March 2008. One-month implied volatility, a measure of exchange-rate swings used to price options, was steady at 4.6 percent, according to data compiled by Bloomberg.

Bangko Sentral ng Pilipinas’s losses widened 187 percent to 68.4 billion pesos ($1.7 billion) in the third quarter, the Philippine Star reported on Nov. 19. The weaker balance sheet “could constrain its ability to prevent further peso strength into the seasonally strong year-end period,” Bank of America said in a research note to clients yesterday.

Consumer-price gains eased to 3.1 percent in October from a year earlier, compared with 3.6 percent in September, official data show. Governor Amando Tetangco said on Nov. 13 the central bank has “policy space” to manage domestic cash flows. First Metro expects a rate cut in December, Yuson said.

The yield on the 5.75 percent bonds due September 2032 was steady at 5.65 percent, according to Tradition Financial Services. It has declined five basis points, or 0.05 percentage point, this week.

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

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


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