Philippine Peso Touches 2008 High as Stimulus Bets Boost Inflows

The Philippine peso touched the strongest level in more than four years after U.S. employment data prompted speculation the Federal Reserve will add to monetary-easing measures, boosting demand for riskier assets.

Payrolls in the world’s largest economy rose by 96,000 last month, compared with the 130,000 median estimate in a Bloomberg survey and the 141,000 jobs created in July, the Labor Department said on Sept. 7. The local currency extended a three-week rally after the Philippine central bank said it may raise inflation targets for 2012 and 2013, and economists forecast policy makers will keep interest rates at record low this week.

“The peso is definitely benefiting from inflows of foreign money into equities” given the speculation on monetary easing by the Fed, said Jose Vistan, head of research at AB Capital Securities Ltd. in Manila. “There’s also increased confidence in the Philippine economy, with the possibility of a rating upgrade.”

The peso gained 0.1 percent to 41.618 per dollar as of 4:22 p.m. in Manila, data from Tullett Prebon Plc showed. It reached 41.548 earlier, the highest level since April 2008. One-month implied volatility, a measure of exchange-rate swings used to price options, was little changed at 5.7 percent.

Foreign investors bought $17 million of local shares last week, taking this year’s net purchases to $2.12 billion, according to stock exchange data.

Rate Outlook

The country was upgraded one level to Ba2 by Moody’s Investors Service in June last year, or two levels below investment grade. Standard & Poor’s raised its rating one step to BB+ on July 4 this year, or one level below investment grade.

The currency pared gain before a government report tomorrow that may show exports shrank 2 percent in July following a 4.3 percent advance in June, based on the median forecast in a Bloomberg survey. Malaysia, Thailand and Taiwan also reported contraction in July shipments.

Bangko Sentral ng Pilipinas will keep its overnight rate at 3.75 percent on Sept. 13, according to 15 of 20 economists in a separate survey. Five predicted a cut to 3.5 percent. Monetary policy remains appropriate while the economy faces significant issues related to higher commodity prices, Deputy Governor Diwa Guinigundo said on Sept. 8.

The yield on the 4.875 percent bond due August 2022 dropped three basis points, or 0.03 percentage point, to 4.8 percent, according to Tradition Financial Services.

The treasury will auction 9 billion pesos ($216 million) of 10-year bonds tomorrow. It last sold 2022 notes on July 31 at an average yield of 4.83 percent.

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