Peso strengthens on S&P upgrade

The peso surged to its highest level since November of last year following Standard & Poor’s (S&P) upgrade of the Philippines’ credit rating on Thursday.

The local currency’s performance was also influenced by the decision of the Bangko Sentral ng Pilipinas (BSP) to further tighten monetary conditions by asking lenders to set aside more of their clients’ deposits as reserves.

Breaching the 43-to-$1 level for the first time this year, the peso ended the week at 43.65: $1, up 54 centavos Thursday’s close of 44.19: $1. The peso’s close was its strongest since Nov. 19, when it closed at 43.595: $1.

Week-on-week, the peso was up 85 centavos. The peso’s performance on Friday also completed a perfect week for the currency, as it appreciated five days in a row.

“The upgrade improves investor confidence, both local and foreign,” BDO Unibank chief market strategist Jonathan Ravelas said.

He said the peso could strengthen further to 43.50: $1 in the coming days. If this level is breached, the peso could appreciate to 43.00: $1.

On Thursday,  S&P unexpectedly upgraded the Philippines by one notch to “BBB” from “BBB-“, in recognition of reforms under the Aquino administration that are expected to continue past the end of the president’s term in 2016.

Demand for the peso was strong, with trades reaching $1.03 billion or 72 percent up from Thursday’s $599.50 million.

The peso started the day strong at 43.90: $1, which was its intra-day low. The currency never looked back as it steadily climbed throughout the day to close at its intra-day high.

Comments by US Federal Reserve Chair Janet Yellen this week also helped in the peso’s climb. The greenback fell to a one-month low following dovish comments by the head of the US monetary authority, who told lawmakers that the US economy took a “pause” in the first quarter. Paolo G. Montecillo