The port operations of Philippines are eased its congestion. As a result the export volumes rebounded more sturdily than expected in March with shipments up 7.4% MoM. This followed a more modest recovery of 4.6% MoM in February, though exports still remain some 12.1% below the recent peak reached in November – pointing to further room for recovery from here.The recovery was driven by non-electronics (particularly machinery and mining), with electronics shipments actually declining on a MoM basis. By country, exports were particularly strong to the US, China, and Japan, rising 9.9%, 8.6%, 8.4% MoM respectively.The central bank seems comfortable with its policy stance. Although low inflation provides room to keep policy on hold, growth remains robust, making it unlikely that the BSP will join other central banks in the region in easing policy in its next meeting on 14th May.The Philippines remains a significant beneficiary of lower oil prices, and we forecast growth of 6.5% in 2015, while the central bank is forecasting even stronger growth of 7-8%.The Philippine peso could be even stronger than present due to numerous reasons. The central bank holds rates steady amid stable inflation pressures and growing economic activity are major elements among those reasons.Technicals Watch: (PHPJPY)Philippine’s currency has traded sideways against the Japanese yen in Q1. Although intraday perspectives suggest some shorting avenues we perceive near future rallies would be sideways as there are no substantial confirmations seen on both daily and weekly charting patterns.Hedging Insights:Option strategy: Long StrangleBecause we perceive the trend in this pairing is largely non directional we would recommend long term overseas traders to go long on strangles.How to execute the strategy: Buying an OTM Call and an OTM Put creates this position.It costs lesser than Long Straddle but requires an even greater move in the underlying currency on either direction.Establish the position with as much time to expiration as possible to give the underlying pair enough time to make a large move and reduce the effect of time decay.Best to use this strategy before a specific event that will move the underlying in a large way in either direction like earnings, litigation decision, economic data etc or when the price is expected to breakout from a consolidation pattern.
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