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Philippine Peso Has 2nd Monthly Gain on Remittances; Bonds Rise

The Philippine peso completed a second monthly gain after money sent home by overseas workers increased and monetary easing in developed nations buoyed demand for higher-yielding assets. Government bonds advanced.

The currency touched a four-year high on Oct. 18 after a central bank report showed remittances from the 9.4 million Filipinos living abroad jumped in August by the most in nine months. The Bank of Japan expanded its asset-purchase fund yesterday for the second time in two months, following the Federal Reserve in September. Moody’s Investors Service raised the Philippines’ credit rating to one step below investment grade this week, citing the nation’s growth prospects.

“Remittances will support gross domestic product and the peso going into the fourth quarter, and the flow is especially stronger during the festive season,” said Reuben Mark Angeles, head of research at First Metro Securities Brokerage Corp. in Manila. “The Moody’s upgrade confirmed what the market has been waiting for.”

The peso rallied 1.3 percent this month to 41.175 per dollar in Manila, data from Tullett Prebon Plc showed. The currency is Asia’s best performer after South Korea’s won in October, and has appreciated 6.5 percent this year, according to data compiled by Bloomberg.

One-month implied volatility, a measure of exchange-rate swings used to price options, rose 10 basis points to 5 percent today. It fell 50 basis points, or 0.5 percentage point, this month. Local financial markets are closed on Nov. 1 and Nov. 2 for public holidays.

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Moody’s upgraded the country one level to Ba1 on Oct. 29, saying the economy was poised to record faster growth, lower inflation, exchange-rate appreciation and an increase in foreign-exchange reserves.

Bangko Sentral ng Pilipinas cut its overnight rate by 25 basis points to 3.5 percent on Oct. 25, the fourth reduction this year. Governor Amando Tetangco signaled rate cuts were no longer sufficient to curb the peso’s gains.

The yield on the 5.875 percent bonds due January 2018 dropped 12 basis points to 4.38 percent in October, capping a fourth monthly decline, according to Tradition Financial Services.

Government securities gained 0.5 percent in October, raising this year’s return to 6.2 percent, according to an index compiled by HSBC Holdings Plc. That compares with a 12.8 percent gain in all of 2011.

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