Peso, Asian currencies inch up on news of US Fed’s low interest policy

MANILA, Philippines—The peso, together with other Asian currencies, strengthened on Wednesday, following the release of a statement from the US Federal Reserve that it would keep interest rate at record low until mid-2013 to stimulate a still sluggish growth of the US economy.

The local currency closed at 42.475 against the US dollar, up by 4.5 centavos from Tuesday’s finish of 42.52:$1.

Intraday high hit 42.35:$1, while intraday low settled at 42.56:$1. Volume of trade amounted to $950.98 million, down from $1.297 billion previously.

Traders said the pronouncement by the US Fed that it would keep its near-zero interest rate for about two years somehow eased concerns of investors over a weak global economic recovery, led by the slower-than-expected expansion of the United States.

Low interest rates are meant to encourage people to borrow and spend, thus help spur economic growth.

The US economy is still challenged by weak consumer spending and relatively high unemployment even after implementation of previous stimulus measure, which is the infusion of hundreds of billions of dollars into the economy through bond purchases.

Market analysts said problems facing the US economy have dampened the outlook for the global economy, and this has caused investors to be risk averse. Heightened risk aversion prompted investors in the previous days to liquefy their assets, even those placed in emerging markets like the Philippines.

But they said the statement from the US Fed allayed the concerns of investors and prompted them to reinvest in portfolio, thus push Asian currencies like the peso.