MANILA, Philippines—The peso strengthened on Thursday amid cuts in borrowing costs offshore and the move of the Philippine central bank to maintain its key policy rates at relatively low levels.
The local currency closed at its two-month high of 43.28 against the US dollar on Thursday, up by 36 centavos from the previous day’s finish of 43.64:$1.
Intraday high hit 43.25:$1, while intraday low settled at 43.4:$1. Volume of trade amounted to $960.01 million from $1.127 billion previously.
The movement of the peso came following the announcement by the Bangko Sentral ng Pilipinas that it has kept its key policy rates at existing levels during the policy-setting meeting of its Monetary Board, which officials said were still relatively low.
The BSP’s overnight borrowing and lending rates, which influence commercial interest rates, thus remain at 4.5 and 6.5 percent, respectively.
Steady rates are seen to further encourage people to borrow from banks and spend more, thus boost overall growth of the Philippine economy, which grew by a slower-than-expected pace in the first three quarters of the year.
The domestic economy grew by an average of 3.6 percent in January to September, making it difficult for the economy to achieve the full-year target of between 4.5 and 5.5 percent.
However, traders said relatively low interest rates might help boost growth in the quarters ahead.
Moreover, they said, moves of other central banks to make borrowing less costly also lifted the sentiment and risk appetite of foreign fund owners. The US Federal Reserve, for instance, has reduced the three-month cross currency basis swap, which is the cost European banks shoulder when they borrow in US dollars, to help stimulate the US economy.
Traders said efforts to support growth globally have been giving hopes that world economic growth would improve within the short term, thus making it prudent for fund owners to invest, such as in securities from emerging markets like the Philippines.