Manila, Philippines - The peso strengthened yesterday to its strongest level since November last year, breaching the 42 to $1 level as the dollar continued to weaken after the US Federal Reserve decided to keep interest rates at record lows while fiscal authorities managed to trim the country’s budget deficit by 81 percent in the first quarter of the year.
The peso gained 29 centavos to hit a five-month high of 42.925 to $1 from Wednesday’s close of 43.215 to $1.
The local currency hit an intra-day high of 42.910 to $1 as volume turnover hit $1.346 billion from Wednesday’s $852.49 million.
Traders said Asian currencies including the Philippine peso continued to strengthen against the dollar after the US Federal Reserve decided to keep interest rates at record lows of zero to 0.25 percent and said it would complete its $600-billion bond buying program to stimulate its stagnant economy.
Aside from the decision of the US Fed, a trader said another strength of the local currency came from the country’s improving fiscal condition.
Economic managers of the Aquino administration reported Wednesday that the country’s budget deficit reached P26.2 billion from January to March this year or P108 billion lower than the P134.2 billion shortfall incurred in the same period last year.
Strong revenue collections and zero-based budgeting scheme under the Aquino administration helped fiscal authorities to outperform its P112 billion budget deficit ceiling for the first quarter of the year by P85.8 billion.
Data showed revenues jumped 21.5 percent to P323.1 billion in the first quarter of the year from P265.8 billion in the same quarter last year while government expenditures fell 12.7 percent to P349.3 billion from P400 billion.
Tokyo-based Japan Credit Rating Agency Ltd upgraded the country’s credit rating outlook to positive from stable. This is the third credit rating agency that upgraded the country’s credit rating and outlook since November last year.
Standard and Poors upgraded the country’s credit rating to two notches below investment grade from three notches last November while Moody’s Investors Service upgraded the rating outlook to positive from stable last January.
Traders also cited the country’s benign inflation outlook as the Bangko Sentral ng Pilipinas (BSP) still believes that the country’s inflation remain well-behaved as it expects April inflation to average between 3.7 percent and 4.7 percent or well within the target of three percent to five percent for the year.
The BSP raised interest rates by 25 basis points last March 24 as a preemptive move to keep inflation expectations well anchored amid the rising oil and food prices in the world market. This brought the overnight borrowing rate to 4.25 percent and the overnight lending rate to 6.25 percent.