Peso to see best day in 6 weeks after election

Jongwoo Cheon, Reuters

Presidential candidate Davao City Mayor Rodrigo Duterte speaks during a press conference after casting his vote in Davao City on Monday. Jonathan Cellona, ABS-CBN News

SINGAPORE - The Philippine peso is set for its biggest gain in six weeks on Tuesday, as results of the country's presidential election roll in and investors start unwinding bearish bets on the currency.

That contrasted with weakness in most emerging Asian currencies on broad strength in the dollar.

The peso started the day softer but turned up, rising nearly 0.5 percent to 46.880 to the greenback in morning trade. If sustained, that would be the largest daily appreciation since March 30, according to Thomson Reuters data. Domestic stocks also turned higher.

The winner of the Philippines' presidential election, tough-talking city mayor Rodrigo Duterte, announced plans to overhaul the country's unitary system of government that would grant more power to the provinces. Duterte's win in the polls has not been confirmed, but an unofficial count of votes by an election commission-accredited watchdog showed he had a huge lead over his closest rivals.

"The election went orderly for the most part with quick results and a candidate acknowledging defeat easily. That should support the peso momentarily," said a senior Philippine bank trader in Manila, referring to a popular senator Grace Poe's concession.

"We will likely get a honeymoon phase where the market gives him a chance to clear his position and policies."

Before the vote, the peso was down more than 2 percent against the dollar so far in the second quarter, underperforming most regional peers on concerns over political uncertainties.

Investors had worried that whoever was elected could find it difficult to generate the economic momentum built up during the current leader, Benigno Aquino's, single six-year term.

Duterte was expected to win the election in opinion polls, but his lack of clear economic policies added to the jitters.

Despite the peso's outperformance on Tuesday, there were doubts about further strength in the currency, analysts and traders said.

"Local equities tend to be soft for a few months post elections, reflecting uncertainty surrounding the economic policies of the incumbent. This tends to weigh on the peso," said Christopher Wong, a senior FX strategist for Maybank in Singapore.

"We need to see policy continuity. Continuity with existing policies for a start will stabilise sentiment."

The Philippine currency is not immune to weakness in other Asian currencies, traders and analysts said.

The senior Philippine bank trader in Manila looked to sell the peso around 46.70-80, saying the unit may weaken to 48.00.