Philippine Peso Completes Best Week Since January on Inflows

The Philippine peso rose this week by the most in three months on speculation dollar supplies will counter the central bank’s moves to spur outflows.

LT Group Inc., the holding company of Philippine tycoon Lucio Tan, raised $920 million from an additional share sale this week, with more than half the investors coming from the U.S. and Europe. San Miguel Corp., the nation’s largest company by sales, issued $800 million of 10-year dollar-denominated debt yesterday. Bangko Sentral ng Pilipinas doubled the amount of dollars residents can freely buy and broadened the range of approved overseas investment to slow peso gains.

“The market observes that flows from the LT Group share sale have been coming in,” said Alan Cayetano, head of foreign-currency trading at Bank of the Philippine Islands, the nation’s largest bank by market capital. “The BSP announcement was more or less expected, so we didn’t see much impact there.”

The peso rose 0.4 percent to 41.06 per dollar at the close in Manila, taking its gain for the week to 0.5 percent, the biggest since the five days ended Jan. 11, according to Tullett Prebon Plc. The currency slipped to 41.413 on April 16, the weakest since Oct. 22. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose two basis points to 4.77 percent.

The yield on the government’s 4 percent bonds due December 2022 fell 13 basis points, or 0.13 percentage point, to 2.93 percent, according to Tradition Financial Services.

Managing Inflows

The central bank, which next reviews monetary policy on April 25, isn’t ruling out a further cut in the interest rate on special-deposit accounts and is “always thinking of additional measures” to manage liquidity, Monetary Board Member Felipe Medalla said yesterday.

Bangko Sentral reduced the rate on those accounts by about half a percentage point each in January and in March. Inflation slowed to 3.2 percent in March from a five-month high in February, official data show.

The Philippines, which won investment-grade status for the first time from Fitch Ratings last month, is seeking to slow a surge in capital inflows that made the peso the second-best performing currency in the region over the last 12 months and drove local shares to a record high in April. Overseas investment in the nation’s stocks and bonds jumped 79 percent from a year earlier to $7.3 billion in the first quarter, after rising to a decade-high in 2012.

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