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Philippine Peso Heads for Best Week Since June 2012 on Surplus

The Philippine peso was poised for its biggest weekly gain since June last year after the current-account surplus widened and the Federal Reserve refrained from cutting stimulus that’s driven capital inflows. Bonds rose.

The balance in the broadest measure of trade climbed to $2.5 billion last quarter from $2.3 billion in the same period a year earlier, Bangko Sentral ng Pilipinas Director Rosabel Guerrero said in a media briefing in Manila today. Overseas investors bought $58.7 million more local shares than they sold yesterday, the biggest net purchases in five weeks, and taking the total this month to $198 million, stock exchange data show.

“We’re sitting on a pile of dollars,” said Marc Bautista, head of research at Metropolitan Bank & Trust (MBT) Co. in Manila. “Money continues to come in because of the latest news from the Fed, aside from the regular flows from remittances and business process outsourcing companies. It’s inevitable the peso will strengthen once again.”

The peso surged 1.9 percent this week to 43.035 per dollar as of the midday break in Manila, the strongest level since June 18, data from Tullett Prebon Plc show. The currency was little changed today.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped 12 basis points to 6.03 percent today and 69 basis points from a week ago. That’s the lowest level since Aug. 19.

The Fed’s decision to keep the size of its monthly bond purchases at $85 billion will spur inflows to emerging markets, Deputy Governor Diwa Guinigundo said at the same briefing.

The yield on Philippines 8 percent bonds due July 2031 fell 13 basis points, or 0.13 percentage point, to 4.72 percent in Manila this week, according to Tradition Financial Services. It rose two basis points today.

To contact the reporter on this story: Karl Lester M. Yap in Manila at kyap5@bloomberg.net

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