Thursday, 8 October 2009

Remittances drive peso appreciation

DOW JONES
Manila Bulletin
http://www.mb.com.ph/articles/223636/remittances-drive-peso-appreciation

The Philippine peso rose to a nine-month high on speculation overseas Filipinos will send more money home this year, spurring an economic recovery. Bonds dropped.

Asian stocks rose after a US report showed service industries in the world’s biggest economy expanded in September for the first time in a year. Funds sent to the Philippines may rise 4 percent in 2009, the International Monetary Fund (IMF) said last week, revising an earlier prediction for a slide of that magnitude. The US is the Southeast Asian nation’s largest source of remittances.

“The recovery in the US seems to be underway” and this may boost remittances and exports, said Jonathan Ravelas, a strategist at Banco de Oro Unibank Inc. in Manila. “What’s driving the peso right now is that people are shying away from the dollar.”

The local currency rose 0.4 percent to 46.533 per dollar as of 10:15 a.m. in Manila, according to Tullett Prebon Plc. It reached 46.60, its highest level since Jan. 7.

The dollar dropped against all of the region’s currencies after the Independent newspaper reported that Arab states have started talks with China, Russia, Japan and France to stop using the greenback for oil trading. The report cited Middle Eastern and Chinese banking officials it didn’t name.

Rising remittances

Funds sent home by overseas Filipinos account for about a 10th of the Philippine economy.

Remittances, which are the second-largest source of foreign-exchange after exports, increased 9.3 percent in July, official figures show.

The MSCI Asia Pacific Index of stocks gained 0.9 percent today, snapping a three-day decline. The US Institute for Supply Management’s index of non-manufacturing businesses, which make up almost 90 percent of the economy, rose to 50.9 from 48.4 in August, according to the Arizona-based group. Fifty is the dividing line between expansion and contraction.

Seven-year bonds dropped, pushing their yield to the highest level in a month, after the government said inflation accelerated from a 22-year low in September. Consumer prices rose 0.7 percent from a year earlier, after gaining 0.1 percent in August, the National Statistics Office said in Manila Thursday.

The yield on the 7 percent note due January 2016 rose two basis points to 7.29 percent, the highest level since Sept. 2, according to Tradition Financial Services.

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