The Philippine peso touched its strongest level in almost five years as better-than-estimated U.S. manufacturing data spurred risk-taking, bolstering demand for emerging-market stocks. Government bonds due 2037 gained.
The Philippine Stock Exchange Composite Index climbed 1.3 percent to a record high today after the Dow Jones Industrial Average rallied 2.4 percent yesterday. The Institute for Supply Management’s U.S. factory index rose to 50.7 in December, compared with 50.5 forecast in a Bloomberg survey, a report showed yesterday. Standard & Poor’s raised the Philippines’ credit-rating outlook to positive from stable on Dec. 20.
“The peso should be stronger given the Dow’s performance,” said Leong Sook Mei, the Singapore-based regional head of global currency research at Bank of Tokyo-Mitsubishi UFJ Ltd. “Among Asian currencies, we still like the peso. There’s the possibility of a credit upgrade either in late 2013 or 2014.”
The peso advanced 0.2 percent to 40.755 per dollar in Manila, its strongest level since March 2008, according to Tullett Prebon Plc. The currency rallied 6.8 percent in 2012. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, was unchanged at 4.3 percent.
S&P cited improved governance and public finances when it boosted its outlook on the Southeast Asian nation. The company assigned the Philippines its top junk rating in July.
Inflation may have quickened to 3 percent in December from 2.8 percent in November, according to the median estimate in a Bloomberg survey of economists before data due tomorrow.
Central bank Governor Amando Tetangco told reporters in Manila today it would be difficult to justify further interest-rate cuts if the economy is strong. Policy makers reduced the benchmark rate by 100 basis points last year.
The yield on the 6.125 percent government bonds due October 2037 slipped one basis point, or 0.01 percentage point, to 5.56 percent, according to prices from Tradition Financial Services. The rate dropped three basis points yesterday.