Philippine Peso Rebounds as Japan Boosts Stimulus; Bonds Decline

The Philippine peso advanced, heading for a second monthly gain, after the Bank of Japan expanded its asset-purchase program to shore up economic growth, supporting demand for higher-yielding assets.

The currency erased earlier losses after BOJ increased the fund today by 11 trillion yen ($138 billion) to 66 trillion yen. An earlier report showed factory output in Japan slumped 4.1 percent in September from August.

“The capital flows are favoring not only the peso but other Asian currencies,” said Patrick Ella, an economist in Manila at Security Bank Corp. “The central bank wants to protect the export sector but it isn’t averse to peso appreciation, just the speed of the gain.”

The peso rose 0.1 percent to 41.213 per dollar in Manila, according to data from Tullett Prebon Plc. The currency has appreciated 1.2 percent since Sept. 30, the second-best performance among the 11 most-traded Asian currencies tracked by Bloomberg. It reached 41.120 on Oct. 18, a level last seen in March 2008, and may reach 41 by year-end, Ella said.

One-month implied volatility, a measure of exchange-rate swings used to price options, rose to 4.9 percent from 4.85 percent, according to data compiled by Bloomberg.

Interest Rates

The Philippines shipped $687 million of goods to Japan in August, a 4.6 percent gain from a year earlier that followed a 27 percent slump in July, official data showed. Growth in shipments to Japan averaged 6.9 percent so far this year, versus 14 percent in 2011 and 28 percent in 2010. Japan was the biggest buyer of Philippine goods in August.

The nation’s economic peformance, growth prospects and interest-rate advantage are pulling in capital from overseas, central bank Governor Amando Tetangco said today.

Bangko Sentral ng Pilipinas has cut its benchmark interest rate four times this year to a record-low 3.5 percent, partly to curb the peso appreciation to help protect exporters. Tetangco said on Oct. 26 lower rates would discourage capital inflows and curb gains in the currency.

The yield on the 5.875 percent bonds due March 2032 climbed one basis point, or 0.01 percentage point, to 5.73 percent, according to Tradition Financial Services. The treasury plans to auction 9 billion pesos ($218 million) of five-year notes on Nov. 6, according to its sales calendar.

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