Philippine Peso Rises on China Easing, Greece Bailout Optimism

The Philippine peso advanced after China relaxed lenders’ reserve requirements, supporting growth in Asia’s biggest economy, and speculation heightened that Greece will secure a second bailout. The government’s 10-year bonds gained.

Bangko Sentral ng Pilipinas expects sustained foreign-currency inflows to support the peso and judges recent gains to have been “broadly in line” with other currencies in the region, Governor Amando Tetangco said on Feb. 18. Greece’s prime minister, Lucas Papademos, said on Feb. 18 his government had identified the cuts necessary to lower spending by 325 million euros ($429 million), helping fulfill the terms needed to obtain financial aid from euro-area members.

“There’s some optimism in the works that Greece has been able to come up with extra cost savings,” said Radhika Rao, an economist at Forecast Pte in Singapore. “Plus there’s the reserve-requirement cut by China. All these are supporting the peso.”

The peso appreciated 0.1 percent to 42.575 per dollar in Manila, contributing to a 3 percent advance for this year, according to Tullett Prebon Plc.

The proportion of deposits that Chinese lenders must set aside as reserves will fall half a percentage point from Feb. 24, the People’s Bank of China said Feb. 18 on its website.

The yield on the government’s 6.375 percent bonds due January 2022 declined two basis points, or 0.02 percentage point, to 5.05 percent, according to noon fixing prices from the Philippine Dealing & Exchange Corp.

The Bureau of the Treasury will sell a minimum 15 billion pesos ($352 million) each of 15- and 20-year retail bonds to banks at tomorrow’s price-setting auction, Deputy Treasurer Eduardo Mendiola said today. It has cancelled next week’s auction of 10-year bonds, he said.

The sales will likely receive “high demand” given market liquidity, Mendiola said.

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