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Philippine Peso Rises for Second Day After Inflows Accelerate

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Feb. 28 (Bloomberg) -- The Philippine peso rose for a second day after global funds quickened purchases of local assets amid optimism a strengthening economy will help the nation win its first investment-grade debt rating.

The currency completed a second monthly gain after the central bank reported Feb. 14 that net inflows into stocks and bonds were $1.3 billion in January, almost six times the amount in December. Gross domestic product rose 6.6 percent last year, the most since 2010, the latest data show. Finance Secretary Cesar Purisima said last week he sees a good chance of an upgrade by Fitch Ratings, which reviewed the country this month and ranks it at the highest junk grade of BB+.

“Investors are still flocking to countries like the Philippines where they are expecting better economic performance and improved credit ratings,” said Emilio Neri, an economist at Bank of the Philippine Islands in Manila.

The peso appreciated 0.1 percent today and this month to 40.662 per dollar at the close, according to Tullett Prebon Plc. It touched 40.63, the strongest level since Feb. 20. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, was unchanged at 3.9 percent.

Sustained easy monetary policy in the U.S. may support risk appetite and push funds to emerging markets including the Philippines, central bank Governor Amando Tetangco said yesterday. Bangko Sentral ng Pilipinas will consider further prudential measures as appropriate “to aid market participants in correctly pricing and perceiving risks,” he said. “We could also further refine our conduct of monetary operations.”

Best Performer

The peso strengthened 5.4 percent in the past 12 months, the best currency performance in Asia.

The yield on the 9.125 percent peso-denominated government bonds due September 2016 declined one basis point, or 0.01 percentage point, to 3.13 percent, according to prices from Tradition Financial Services.

Bangko Sentral cut the rate it pays on about $44 billion in its special-deposit accounts to 3 percent from more than 3.5 percent last month while maintaining the benchmark overnight borrowing rate at a record-low 3.5 percent. There is room to further refine the special accounts to keep them as a liquidity management tool and not an investment outlet, Tetangco said on Feb. 15.

To contact the reporter on this story: Clarissa Batino in Manila at cbatino@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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