Philippine Peso Climbs to 2008 High as Deutsche Bank Sees Rally

The Philippine peso rose to its strongest level in almost five years as Deutsche Bank AG predicted the currency will strengthen 7 percent by the end of 2013. Government bonds advanced.

The peso rose 0.2 percent to close at 40.702 per dollar in Manila, the strongest level since March 2008, prices from Tullett Prebon Plc showed. It climbed 6.8 percent last year, a performance second only to South Korea’s won among Asia’s 11 most-traded currencies. One-month implied volatility, a measure of expected moves in exchange rates used to price options, was unchanged at 4.1 percent.

Dollar receipts will support the peso’s advance to 38 against the greenback, Michael Spencer, Deutsche Bank’s chief economist for Asia, said at a briefing in Manila today. Bangko Sentral ng Pilipinas may raise its benchmark rate three times this year to contain inflation, he said. The peso will gain 3.2 percent to 39.5 by the end of 2013, according to the median estimate of 20 analysts surveyed by Bloomberg.

“To the extent there are underlying flows, the central bank will be willing to accommodate some appreciation,” of the peso, Sameer Goel, head of Asian rates and currency strategy at Deutsche Bank in Singapore, said at the same briefing.

The central bank cut its overnight borrowing rate four times last year to a record-low 3.5 percent. The $225 billion economy is at risk of overheating and “it’s very healthy for the Philippines for interest rates to go up,” Spencer said.

Weaker Exports

Bonds advanced after the government reported today that exports rose 5.5 percent in November from a year earlier. That was the least since August and compares with the median estimate in a Bloomberg survey for a 20 percent jump.

The yield on the 3.875 percent notes due November 2019 fell seven basis points, or 0.07 percentage point, to 4.11 percent, halting a four-day advance, according to midday fixing prices at Philippine Dealing & Exchange Corp.

Bangko Sentral has in place “prudential measures to forestall any potential asset bubble, particularly in the real estate industry -- all of which are equivalent to tightening monetary conditions beyond what seems to be impressed upon by the interest rate indicators,” Deputy Governor Diwa Guinigundo said in an e-mail today when asked to comment on Deutsche’s forecast for borrowing costs to be raised.

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