Peso sets new 4-year high at 41.68 to dollar after credit rating upgrade

AFP PHOTO/ROMEO GACAD

MANILA, Philippines—The peso strengthened Thursday to hit a new four-year high as the market rejoiced the credit-rating upgrade for the Philippines granted by Standard & Poor’s.

The local currency closed at 41.68 against the US dollar, up by 15 centavos from the previous day’s finish of 41.83:$1.

The last time the peso hit at least as strong as 41.68:$1 was on March 24, 2008, when the local currency ended the trading day at the same exchange rate against the greenback.

Intraday high hit 41.60:$1, while intraday low settled at 41.73:$1. Volume of trade amounted to $808.10 million from $1.19 billion.

The appreciation of the peso came following the release of a report saying Standard & Poor’s raised the Philippines long-term foreign currency rating from BB to BB+, or from two notches to one notch below investment grade.

S&P said its decision was based on the country’s improving credit profile, characterized by a declining debt burden and rising external liquidity that makes it able to service its liabilities to foreign creditors.

From a peak of 84 percent in 2004, the national government’s outstanding debt as a proportion of the country’s gross domestic product had gradually fallen until reaching only about 50 percent to date.

Moreover, the Philippines’ reserves of foreign currencies, or the gross international reserves (GIR), hit a historic high of $77 billion earlier this year. The amount was enough to cover for 11 months worth of imports and was equivalent to about six months of the country’s short-term debts denominated in foreign currencies.

Traders said the upgrade of the country’s credit rating boosted the appetite of fund owners for peso-denominated assets.

Purchases of peso-denominated stocks pushed the Philippine Stock Exchange Index (PSEI) to close at 5369.98, up by 15.26 points from the previous day’s finish.