The Philippine peso climbed to an 11- month high after European leaders announced measures to ease a regional debt crisis, bolstering demand for emerging-market assets. Government bonds gained.
The peso strengthened for a fifth day, its longest winning streak in almost five months, and the MSCI Asia-Pacific Index of shares rose to a seven-week high. Philippine President Benigno Aquino approved a 10 percent jump in government spending to 2.006 trillion pesos ($48 billion) in 2013, Budget Secretary Butch Abad said today.
“The Europe resolution eliminated some uncertainties and triggered appetite for risk,” said Jonathan Ravelas, chief market strategist at Manila-based BDO Unibank Inc. (BDO) “Rising government spending is helping create a very strong economic environment, which is good for the currency.”
The peso appreciated 0.3 percent to 42.018 per dollar as of the close in Manila, prices from Tullett Prebon Plc show. It earlier touched 41.95, the strongest level since Aug. 2, 2011. One-month implied volatility, a measure of exchange-rate swings used to price options, was unchanged at 6.3 percent.
European leaders dropped a requirement that governments get preferred-creditor status on crisis loans to Spanish lenders during a two-day summit that ended June 29. Spanish and Italian bonds rallied after the announcement, paring losses for the second quarter.
The yield on the Philippine government’s 5.75 percent bonds due November 2021 slid three basis points to 5.275 percent, according to Tradition Financial Services. A basis point is 0.01 percentage point.
To contact the reporter on this story: Karl Lester M. Yap in Manila at firstname.lastname@example.org