Philippine Peso Advances After Competitiveness Ranking Improves

The Philippine peso and bonds rose after the nation’s ranking improved in an international competitiveness survey.

The Southeast Asian country placed 65th in the World Economic Forum’s 2012 Global Competitiveness report released yesterday, 10 levels better than last year. The government is ready to support growth and will accelerate spending to meet the top end of a 5 percent to 6 percent growth estimate this year, Economic Planning Secretary Arsenio Balisacan said on Aug. 30.

“Improving competitiveness may be one of the triggers for the peso’s gain today,” said Emilio Neri, an economist at Bank of the Philippine Islands in Manila. “Government spending is also starting to kick in.”

The peso rose 0.3 percent to 41.865 per dollar, the highest closing level since Aug. 9, data from Tullett Prebon Plc (TLPR) showed. One-month implied volatility, which measures exchange-rate swings used to price options, was unchanged at 5.7 percent.

The yield on the 7.75 percent bonds due August 2017 fell five basis points, or 0.05 percentage point, to 4.73 percent, according to midday fixing prices at Philippine Dealing & Exchange Corp.

Inflation accelerated to 3.8 percent in August, the fastest pace since January, the government reported yesterday. Full-year consumer-price gains will be within the central bank’s 3 percent to 5 percent target, Governor Amando Tetangco said following the release of the data.

Bangko Sentral ng Pilipinas cut its policy rate to a record-low 3.75 percent in July. The monetary authority will next meet to review borrowing costs on Sept. 13. Authorities will need to use tools other than the benchmark rate in times of “strong capital inflows,” Tetangco said today.

Expectations that the central bank will hold borrowing costs next week amid faster inflation also supported the peso, according to Bank of the Philippine Islands (BPI)’s Neri.

To contact the reporter on this story: Clarissa Batino in Manila at cbatino@bloomberg.net

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

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