Philippine Peso Snaps 4-Day Slide Before GDP Report; Bonds Gain

The Philippine peso rose, halting a four-day slide before an official report this week forecast to economic growth accelerated in 2012, bolstering the case for a credit-rating upgrade. Government bonds advanced.

The currency rebounded from its biggest loss in four months after the central bank said it will smooth exchange-rate swings. The Southeast Asian economy grew 6.4 percent last year versus 3.9 percent in 2011, according to the median forecast in a Bloomberg News survey before data due Jan. 31. The nation will probably win an investment-grade rating in the first half, central bank Governor Amando Tetangco said Jan. 26.

“The peso is driven by fundamentals, especially from remittances, market inflows and the potential for credit-rating upgrades,” said Reuben Mark Angeles, head of research at First Metro Securities Brokerage Corp. in Manila. “Intervention possibility is there, but we think any weakness is a buying opportunity.”

The peso rose 0.3 percent 40.795 per dollar as of 11:17 a.m. in Manila, according to data from Tullett Prebon Plc. The currency has appreciated 0.6 percent this year and could surpass 40 per dollar by year-end, Angeles said.

The currency will likely end the year at 41 to 42 as Bangko Sentral ng Pilipinas will probably temper gains to ensure economic growth is sustained, Bank of the Philippine Islands economist Emilio Neri said in an e-mailed note yesterday.

Rating Outlook

One-month implied volatility, a measure of expected exchange-rate swings used to price options, was little changed at 4.5 percent, the highest level this year, according to data compiled by Bloomberg.

The Southeast Asian has the highest junk rating at Moody’s Investors Service, Fitch Ratings and Standard & Poor’s. S&P, which raised the outlook on the country’s debt to positive last month, said an upgrade is possible this year, citing improved governance and public finances.

Moody’s upgraded the country one level to Ba1 on October, saying the economy was poised to record faster growth, lower inflation, and exchange-rate appreciation. S&P raised it one step to BB+ in July.

“The sentiment remains bullish on the peso given expectations of sustained growth momentum and credit-rating upgrades,” said Alan Cayetano, head of foreign-exchange trading at Bank of the Philippine Islands (BPI) in Manila, the nation’s biggest lender by market value.

The yield on the 4.75 percent bonds due September 2022 dropped five basis points, or 0.05 percentage point, to 4.05 percent, according to Tradition Financial Services. The yield has declined 25 basis points this month.

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