Philippine Peso Records Weekly Decline on Fears over Delayed Credit Rating Upgrade

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Philippine Peso Records Weekly Decline on Fears over Delayed Credit Rating Upgrade The Philippine peso posted losses this week as the market mulled over the prospect of the weakest economic expansion since 2011 delaying debt-rating upgrades.

The peso has declined 0.2 percent this week to trade at 43.75 against the U.S. dollar in Manila. This effectively erased last week’s advance of 0.2 percent.

Gross domestic product rose 5.7 percent in the first quarter, the weakest since the last three months of 2011, after key economic pillars such as tourism, manufacturing, insurance and agriculture took a hit from natural disasters. Philippines president Benigno Aquino said last week that he expects Fitch Ratings or Moody’s Investors Service to revise upwards the country’s long-term credit outlook. This is after Standard & Poor’s increased the credit rating one notch higher to BBB on May 8.

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“The rating agencies may be more cautious now and wait for one or two quarters before coming up with any changes,” Alan Cayetano, a Manila-based head of foreign-exchange trading at Bank of the Philippine Island, told Bloomberg. “The upgrade euphoria has worn off a bit and the next one may take a little longer to come.”

The peso’s one-month implied volatility, which measures the expected shifts in the exchange rate used to assign value to options, accelerated 0.05 percentage point, or five basis points, this week and plunged 54 basis points in May to stand at 4.48 percent.

Philippines Economic Planning Secretary Arsenio Balisacan said the interventions by central bank to curb an asset bubble weighed on the construction sector, which declined 6 percent in the first quarter. He added that he expects the economy to grow faster in the remaining three quarters of this year to the targeted 6.5 percent to 7.5 percent. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com