Philippine Peso Gains on Remittances Speculation; Bonds Advance

The Philippine peso rose for the first time in three days on speculation Filipinos working overseas will send more money home in the coming weeks. Government bonds advanced.

Remittances account for about 10 percent of the $225 billion economy, and inflows usually increase before the nation’s school year starts in June. The transfers climbed in May 2012 by $72.5 million from the previous month to $1.77 billion, having risen $72 million in May 2011, central bank data show. Only three months recorded bigger increases in the last two years. Figures for February are due to be reported today.

“Overseas Filipino workers remit more dollars than normal in April and May to pay for their kids’ tuition,” said Lito Mercado, head of trading at Rizal Commercial Banking Corp. in Manila. “Banks would be cautious being long on dollars.”

The peso appreciated 0.1 percent to 41.210 per dollar as of 10:33 a.m. in Manila, according to prices from Tullett Prebon Plc. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, increased 13 basis points, or 0.13 percentage point, to 4.72 percent.

The currency lost 0.9 percent this month on speculation the central bank will cut the interest rate on its special-deposit accounts for a third time this year. Bangko Sentral ng Pilipinas Governor Amando Tetangco said April 3 the option of reducing the rate will be retained. The next policy review is scheduled for April 25.

The yield on the 8 percent government bonds due July 2031 dropped 11 basis points to 3.75 percent, according to prices from Tradition Financial Services.

To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net

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

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