Philippine Peso Advances as Fed's Growth Outlook Boosts Stocks

By Clarissa Batino

June 26 (Bloomberg) -- The Philippine peso gained on speculation investors will buy the nation's stocks after the Federal Reserve said risks to U.S. growth have diminished and inflation will moderate later this year.

The peso, the region's worst performer this quarter, climbed after the main stock index advanced for a second day. Bangko Sentral ng Pilipinas Governor Amando Tetangco today said ``the Fed's emphasis on inflation could be positive for emerging-market economies.''

Although the Fed flagged inflation risks, ``it also said that it would moderate and that risks to growth have diminished, improving the sentiment of investors'' and buoying the local currency, said Ricky Cebrero, a treasurer at East West Banking Corp. in Manila.

The currency rose to 44.475 per dollar as of 9:50 a.m. in Manila, according to Tullett Prebon Plc. It closed at 44.59 yesterday, according to Bankers Association of the Philippines. Today's gain is ``just a knee-jerk reaction'' and the peso may weaken to 45.85 next quarter, the East West treasurer said.

The Fed kept its benchmark rate at 2 percent yesterday. ``That gives the Philippine central bank the flexibility not to be aggressive in hiking interest rates,'' Cebrero said.

To contact the reporter on this story: Clarissa Batino in Manila at cbatino@bloomberg.net.