Peso falls after news of policy rate cuts

MANILA, Philippines—The peso fell on Thursday following the announcement of a cut in the policy rates by the Bangko Sentral ng Pilipinas.

The local currency closed at its intraday low of 43.5 against the US dollar, down by 10 centavos from 43.4:$1 on Wednesday.

Intraday high hit 43.26:$1, while volume of trade amounted to $937.93 million from $1.45 billion previously.

Traders said the peso was stronger in morning and mid-day trade, but fell in the afternoon to close weaker than the previous day’s rate following the announcement by the BSP of policy rate cut.

A cut in the central bank’s key policy rates, which influence commercial interest rates, would cause a drop in yields of securities as well. In turn, appetite for securities in the Philippines was somewhat dampened, market players said.

The BSP cut its overnight borrowing and lending rates by 25 basis points to 4.25 and 6.25 percent, respectively. Officials said the move was aimed at boosting growth of the domestic economy in the wake of a prolonged crisis in the eurozone.

The crisis in the eurozone is projected to dampen the Western region’s demand for goods exported by countries like the Philippines.

BSP officials said low interest rates in the Philippines would boost demand for loans, thus accelerate rise in consumption and investments and cushion the impact of the crisis in the West.

The Philippine government targets a 5- to 6-percent economic growth for the Philippines this year.