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Philippine Peso Falls as Spain Concern Mounts

The Philippine peso snapped a three-week loss after Moody’s Investors Service raised the nation’s credit-rating outlook to positive and first-quarter economic growth beat analysts’ estimates.

The move by Moody’s on May 29 increases chances the country will be upgraded from Ba2, two levels below investment grade. The economy grew 6.4 percent in the three months to March from a year earlier, more than the 4.3 percent median estimate of economists in a Bloomberg News survey.

“There’s a silver lining and we saw two this week: the outlook rating upgrade and the first-quarter numbers were positive,” said Jonathan Ravelas, chief market strategist at BDO Unibank Inc. in Manila. “The peso is resilient but not immune to this global volatility.”

The currency appreciated 0.8 percent this week to 43.393 per dollar at the close in Manila, according to Tullett Prebon Plc. It rose 0.2 percent today. One-month implied volatility, a measure of exchange-rate swings used to price options, climbed 25 basis points, or 0.25 percentage point, to 7.75 percent this week and was unchanged today.

The Bloomberg-JPMorgan Asia Dollar Index was poised for a fifth weekly loss as concern Europe’s worsening debt crisis will derail global economic growth boosted demand for the relative safety of the greenback.

China Slowdown

China’s Purchasing Managers’ Index of manufacturing fell to 50.4 in May from 53.3 in April. That’s the weakest reading since December and compares with the 52 median forecast in a Bloomberg News survey of economists. A reading above 50 indicates expansion.

“China is realizing a slowdown,” said Ravelas. “If there is continued uncertainty in Europe, a 44 peso level will be vulnerable,” he predicted.

The yield on the government’s 5.875 percent bonds due March 2032 rose two basis points this week to 6.05 percent, according to prices from Tradition Financial Services. The rate was little changed today.

The government seeks to further improve liability management and may offer to buy back expensive dollar-denominated debt, Finance Undersecretary Rosalia de Leon told reporters today in Manila.

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