Peso rises slightly on reports of more interest rate hikes

MANILA, Philippines—The peso inched up slightly on Wednesday as expectations of further rise in interest rates in emerging Asian economies, including the Philippines, convinced investors to place funds in these parts of the world.

The local currency closed at 43.44 against the US dollar, up by 2 centavos from the previous day’s finish of 43.46:$1.

Intraday high stood at 43.37:$1, while intraday low settled at 43.50:$1. Volume of trade rose to $752.68 million from $730.8 million previously.

Traders said Asian central banks would further increase their policy rates—which would also influence commercial interest rates, such as yields of securities—and so some investors decided to buy securities from emerging markets in the region to generate income if the interest rates materialized.

In the case of the Philippines, the Bangko Sentral ng Pilipinas has already raised its key policy rates last week by 25 basis points, but some investors expect it to implement some more rate hikes in the months ahead as inflation estimates rise.

Higher interest rates are meant to curb increase in consumer prices, which are projected to rise at faster rates in the coming months due to rising oil prices in the world market and increasing demand for goods and services.

The expectation of another rate hike is partly anchored on statement from the BSP that it is prepared to take further action if inflationary pressures build up some more.

Traders said the BSP, as well as neighboring central banks, have been tackling the prospect of rising inflation, and so investors believed they would all move to further raise interest rates.