Philippine peso hits 3-week high

by Jongwoo Cheon, Reuters

Posted at Aug 28 2014 01:27 PM | Updated as of Aug 29 2014 12:37 AM

GDP data backs case for rate hike

SINGAPORE - The Philippine peso rose to its strongest in more than three weeks on Thursday as better than expected economic growth data boosted chances for a further rate hike, while capital inflows fuelled further gains in most emerging Asian currencies.

Indonesia's rupiah went against the trend, due to a combination of importers need for foreign currency and concerns over how exports will be affected if coal mining contracts are revoked due to unpaid royalties.

The Philippine economy grew 6.4 percent in the second quarter from a year earlier, the fastest pace in more than a year, led by strong manufacturing and exports. That compared with a Reuters poll forecast for 6.2 percent growth.

The data powered the peso to P43.55 per dollar, its strongest since Aug. 5, even though it later gave up all the gains amid month-end dollar demand from local companies.

"It puts PHP on a solid footing compared to other economies in the region," said Jonathan Cavenagh, senior FX strategist with Westpac in Singapore, who expects the central bank to raise interest rates.

"BSP might continue to look to accumulate USD's but this is probably the only factor that can stand in way of further PHP strength," Cavenagh said, referring to the Bangko Sentral ng Pilipinas.

The peso's one-month non-deliverable forwards (NDFs) is likely to test P43.50 per dollar, he added.

The NDF barely changed at 43.65 as of 0430 GMT.

"Stronger-than-expected data will fuel stronger talks of Moody's upgrading the Philippines very soon," said a senior Philippine bank trader in Manila who saw spot peso possibly strengthening to 43.20.

Moody's Investors Service currently has a "positive" outlook for the Philippines' rating and its team just finished a visit to the country.