Peso rises on expectations of raised interest rates in Asia

MANILA, Philippines—The peso inched up further on Tuesday amid expectations that interest rates in the country and the Asian region in general would rise.

The local currency closed at 43.055 against the US dollar on the second trading day of the week, up by 10 centavos from Monday’s finish of 43.065:$1.

Intraday high hit 43.05:$1, while intraday low settled at 43.13:$1. Volume of trade went down to $754.59 million from $879 million previously.

Traders said there has been a general expectation that interest rates in emerging Asian markets would continue to rise in the months ahead due to inflation.

The appreciation of the peso on Tuesday came following the release of the report that the inflation rate in June accelerated from that in May.

Inflation hit a 26-month high of 4.6 percent from May’s 4.5 percent. The figure represents the quickest rate of price increase since the 4.8 percent recorded in April 2009, National Statistics Office data shows.

Central banks are expected to temper inflation through increase in interest rates. Higher interest rates, consequently, tend to influence rise in yields of portfolio instruments as well. This prompted investors to put money in portfolio assets in emerging economies like the Philippines, traders explained.