Philippine Peso Extends Rebound From Five-Month Low; Bonds Gain

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.

‘Good Opportunity’

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.

To contact the reporters on this story:
Kyoungwha Kim in Singapore at;
Andrea Wong in Taipei at

To contact the editor responsible for this story:
James Regan at

Philippines May Ease FX Rules Early as April

March 28 (Bloomberg) — Philippine central bank Governor Amando Tetangco talks about monetary policy and the outlook for the country’s economy and currency.
The Philippines achieved investment grade for the first time as Fitch Ratings raised its assessment yesterday. Tetangco speaks from Manila with Rishaad Salamat on Bloomberg Television’s “On the Move.” (Source: Bloomberg)

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