Philippine peso one-month forwards rallied the most this month, paring a weekly drop, on optimism an improving balance of payments boosts the odds of the nation winning its first investment-grade credit rating.
The peso, Asia’s best-performing currency of the past year, is set to defy policy makers’ efforts to curb its gains as the advance is cooling inflation and the nation will exit junk rating, according to Schroder Investment Management Ltd. and Mizuho Corporate Bank Ltd. The country had a balance of payments surplus of $2 billion in January, compared with $640 million the month before, the central bank reported Feb. 19.
“We’re still quite positive on the peso because the underlying driver hasn’t really changed at all,” said Enrico Tanuwidjaja, an economist in Singapore at Royal Bank of Scotland Group Plc. “You have the fundamentals and the expectation of an upgrade. The balance of payments is supportive of that thesis.”
One-month non-deliverable forwards rose 0.3 percent to 40.73 per dollar as of 10:30 a.m. in Manila, reducing this week’s decline to 0.3 percent, data compiled by Bloomberg show. The contracts traded at a 0.03 percent premium to the spot rate, which fell 0.1 percent today and 0.4 percent for the week, according to prices from from Tullett Prebon Plc.
The peso’s drop this week was due to “the air of uncertainty on whether macroprudential measures may be imposed to moderate flows,” said Tanuwidjaja.
The central bank will maintain a strategic presence in the foreign-exchange market and adopt prudential measures to ensure the exchange rate is aligned with fundamentals, Governor Amando Tetangco said in a speech in Manila on Feb. 15.
Bangko Sentral ng Pilipinas restricted the use of currency forwards in December to curb speculation and the cut the interest rate on its special-deposit accounts in January. The peso advanced 4.8 percent against the dollar in the past year.
One-month implied volatility in the peso, a measure of expected moves in the exchange rate used to price options, dropped 30 basis points, or 0.30 percentage point, to 3.9 percent this week and is unchanged today, according to data compiled by Bloomberg.
The yield on the 6.125 percent bonds due October 2037 fell one basis point this week to 4.88 percent, according to prices from Tradition Financial Services. The rate rose one basis point today.
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