Peso rises on good news from China, Greece

MANILA, Philippines—The peso inched up on the first trading day of the week following the move of China to cut its reserve requirement ratio for banks in a bid to stimulate economic growth.

The peso value also rose amid expectations a second bailout package for Greece would be signed this week.

The local currency closed at P42.575 against the US dollar on Monday, up by 4 centavos from Friday’s finish of 42.615:$1.

Intraday high hit 42.43:$1, while intraday low settled at 42.60:$1. Volume of trade amounted to $993 million from $935 million previously.

Traders said the move of the People’s Bank of China to cut the reserve requirement ratio by 0.5 percentage point to 20.5 percent – to take effect on Feb. 24 – has been seen by investors as a way to help keep the Chinese economy growing strongly and avoid a hard landing following years of posting very high growth rates.

The reserve requirement ratio is the proportion of deposits held by banks that must be kept as reserves.

Reducing the ratio means there will be more liquidity available for lending and that may help spur consumption and investments.

Traders said sustained strong growth for China would be favorable for emerging market neighbors, like the Philippines, that have been exporting goods to the biggest Asian economy.

The appreciation of the peso and other key Asian currencies on Monday likewise came amid expectations that European policymakers would finally approve this week the second bailout package for debt-ridden Greece.

A rescue for Greece should help prevent the investors’ outlook for the global economy from worsening, traders said.