Peso dips on news of BSP move to cut interest rates

MANILA, Philippines—The peso weakened on Thursday in anticipation of the move of the Bangko Sentral ng Pilipinas in the afternoon to cut its key policy rates.

The local currency closed at 42.8 against the US dollar, down by 5 centavos from the previous day’s finish of 42.75.

Intraday high hit 42.67:$1, while intraday low settled at 42.84:$1. Volume of trade amounted to $814.34 million from $856.8 million previously.

The BSP again cut its key policy rates by another 25 basis points Thursday, bringing down its overnight borrowing and lending rates to historic low of 4 and 6 percent, respectively. The record low was last implemented in March 2011.

The central bank cut its rates with the objective of helping spur growth of the economy. Lower rates are meant to boost demand for loans, which in turn are seen to support higher consumption and investments.

The move followed the similar 25-basis-point cut done by the BSP last January.

Traders said lower interest rates, although known to spur demand for loans, could influence decline in yields of portfolio assets. Therefore, they said, demand by foreign fund owners for peso-denominated assets was dampened and the local currency dropped.