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Philippine Peso Gains Most in Seven Weeks on Economic Outlook

The Philippine peso completed its biggest gain in seven weeks as the government said it plans to increase spending, boosting the nation’s economic growth outlook. Government bonds were little changed.

The country’s balance of payments reached a 20-month high of $3.18 billion in July, official data showed on Aug. 22. Finance Secretary Cesar Purisima said yesterday that last month’s budget deficit, the biggest since December, is within expectations and the government has fiscal space to pump prime the economy. Gross domestic product will increase as much as 6 percent this year, faster than the 3.9 percent growth in 2011, Budget Secretary Butch Abad told reporters last month.

“In the grander scheme of things, the growth story holds up,” said Vishnu Varathan, a Singapore-based economist at Mizuho Corporate Bank Ltd. “The strong balance of payments is also a boost, and adds to the shine of the peso.”

The peso climbed 0.6 percent this week to 42.167 per dollar as of 4:12 p.m. in Manila, the most since the week ended July 6, Tullett Prebon Plc prices showed. The currency retreated 0.1 percent today. One-month implied volatility, a measure of exchange-rate swings used to price options, was unchanged this week and today at 6.30 percent.

The Philippines reported a budget shortfall of 39.2 billion pesos ($931 million) yesterday. Gross domestic product increased 5.6 percent in the second quarter from a year earlier, compared with 6.4 percent in the preceding three months, according to the median estimate of economists surveyed by Bloomberg News before official data due Aug. 30.

The yield on the 9.125 percent bonds due September 2016 was steady at 4.40 percent today and for the week, according to prices from Tradition Financial Services.

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