May 28 (Bloomberg) -- The Philippine peso had a first weekly gain in three after Fitch Ratings on May 26 became the only global credit assessment company in four years to grow more optimistic about the country's ability to pay its debt.

The peso gained as Fitch raised the outlook on the country's debt rating to stable from negative on measures to boost public finances. President Gloria Arroyo on May 24 signed bills to raise taxes and cut the budget deficit. Moody's Investors Service and Standard & Poor's this year cut their Philippine ratings.

``An improvement in the deficit, which is one of the biggest problems for the Philippines, is positive for the peso,'' said Osamu Takashima, chief analyst of the foreign exchange and treasury division in Tokyo at Bank of Tokyo-Mitsubishi Ltd., a unit of Japan's second-biggest lender. ``The peso could outperform other regional currencies in the short term.''

The peso rose 0.3 percent this week to 54.40 against the dollar, according to the Bankers Association of the Philippines. The currency may rise to 54 in several weeks, Takashima said.

The key stock index yesterday had its biggest gain in almost three weeks after the improved rating outlook and on optimism the government can pare its $75 billion of debt. The Composite Index rose 0.9 percent to 1875.41, ending a five-day, 1.8 percent drop. It was the biggest gain since May 9, when it added 1.7 percent.

Increases in value-added and corporate income taxes will add at least 28 billion pesos ($515 million) to government income this year, helping to cut the deficit, Finance Secretary Cesar Purisima said on May 10.

Thai Baht

The Thai baht had a third weekly loss and the biggest since the week ended April 8, after a report on May 25 showed the nation's trade deficit surged in April to the most since July 1996.

Southeast Asia's second-biggest economy may post a trade gap of as much as $5 billion this year, its first annual shortfall since 1997, according to the central bank.

Thailand had a record current-account deficit of $14.4 billion in 1996 before a baht devaluation that triggered a financial crisis across Asia. It last had a deficit in 1997.

For the first three months of 2005, the country had a shortfall of $1.5 billion, according to the central bank. A deficit means more funds flow out, weighing on the currency.

``There's a concern the nation will post the biggest trade deficit since the financial crisis,'' said Ichiro Ikeda, vice president of the global foreign-exchange and commodity group at JPMorgan Chase Bank in Tokyo. ``A rising trade deficit may increase the current account deficit, which means outflow of money and a weaker baht.''

Exporters Selling

The Thai baht dropped 1.2 percent this week to 40.45 against the dollar, the weakest since Nov. 15, and yesterday fell 0.3 percent from late Asia on May 26. JPMorgan expects the baht to weaken to 40.50 at the end of June, Ikeda said.

South Korea's won had its first weekly gain for this month on speculation exporters hastened sales of dollars they earned abroad before booking profit at the month's end.

The won yesterday retreated from an advance of as much as 0.3 percent on speculation the central bank sold its currency to stem gains beyond 1,000. A stronger won erodes profits exporters such as Samsung Electronics Co. make abroad and makes it harder for them to compete with overseas rivals.

``The appreciation pressure for the won is very strong,'' said Myung Gwan Byun, a treasury manager in Seoul at Chohung Bank, a unit of South Korea's second-biggest financial services company. ``Exporters come in to sell the U.S. dollar every time it goes higher.''

`Better Outlook'

The won advanced 0.2 percent this week to 1,002.50 against the dollar, according to Seoul Money Brokerage Services Ltd. The currency may trade between 995 and 1,010 next week, Byun said.

The Taiwan dollar yesterday gained for the first day in three on optimism demand for the island's exports from the U.S., its second-biggest overseas market, will increase.

The U.S. economy expanded at a faster pace in the first quarter than initially estimated, a report on May 26 showed.

``The strong U.S. consumption translates into a better outlook for Taiwan's exports, supporting the currency,'' said Takashi Yano, vice president of the derivatives and foreign- exchange marketing department in Tokyo at UFJ Bank Ltd., a unit of Japan's fourth-biggest lender. ``Taiwan's exports have a big impact on growth.''

Taiwan's currency rose 0.1 percent to NT$31.361 against its U.S. counterpart from May 26, according to Taipei Forex Inc. The currency may strengthen to around NT$31 in two weeks, Yano said.

The currency was little changed on the week.

Elsewhere in Asia, the Singapore dollar yesterday was little changed at S$1.6594 against its U.S. counterpart from late Asia on May 26 and the Indonesian rupiah held at 9,490 per dollar.

To contact the reporter on this story: Yumi Kuramitsu in Hong Kong ykuramitsu@bloomberg.net

Last Updated: May 27, 2005 19:41 EDT