The Philippine peso extended its rebound from a five-month low even after the central bank unveiled additional measures to encourage capital outflows. Government bonds gained.
Bangko Sentral ng Pilipinas doubled the amount of dollars residents can freely buy and broadened the range of approved outward investments. Filipinos can now purchase as much as $120,000 from banks without documentation, BSP Deputy Governor Nestor Espenilla said today in Manila. Investments in overseas property, foreign-currency mutual funds and debt are now allowed using locally-bought greenback, he said. Fund inflows into the $225 billion economy jumped 79 percent from a year earlier to $7.3 billion in the first quarter.
“This is meant to signal that they want to increase demand for U.S. dollars so their intervention in the foreign-exchange market will be lessened,” said Paul Joseph Garcia, who helps manage the equivalent of $18.4 billion at BPI Asset Management in Manila. “But the problem is, you cannot fight the inflows. We’re one of the hottest emerging markets right now.”
The peso strengthened 0.1 percent to 41.205 against the greenback in Manila, extending yesterday’s 0.4 percent advance, according to Tullett Prebon Plc. It touched 41.413 on April 16, the weakest level since Oct. 22. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose six basis points, or 0.06 percentage point, to 4.79 percent.
The Philippines won its first investment-grade ranking from Fitch Ratings on March 27, which fueled the biggest rally in the peso in six months that day and drove the benchmark stock index to a record on April 1. The peso reached 40.55 per dollar on Jan. 14, the strongest since March 10, 2008.
Under the new rules, domestic companies can obtain dollars locally this year to meet payments on foreign-currency loans that are not registered with the central bank, a move that may boost dollar demand by as much as $1 billion, BSP Director Patria Angeles said. Tourists can now change back as much as $10,000, double the previous limit, before they leave the country, according to the central bank.
“It’s difficult to say if the new measures will weaken the peso but it’s a good opportunity for banks to use their foreign-exchange resources,” said Angeles.
The rule adjustments, which will allow easier access to foreign exchange, are aimed at encouraging fund outflows, BSP Governor Amando Tetangco told Bloomberg Television on March 28, when he revealed the April timetable for the changes.
Philippine local-currency bonds returned 13.4 percent this year, the best-performance among Asia’s 10 biggest debt markets, according to indexes compiled by HSBC Holdings Plc.
The yield on the government’s 4 percent bonds due December 2022 dropped 10 basis points to 3.05 percent, prices from Tradition Financial Services show.