Peso goes up to 42-to-dollar level on reports of US stimulus
MANILA, Philippines—The peso, together with other major Asian currencies, inched up on Thursday to move back to the 42-to-a-dollar territory following reports that the US Federal Reserve could inject another round of stimulus to the struggling US economy.
The local currency closed at 42.94 against the US dollar, up by 11 centavos from the previous day’s finish of 43.05:$1.
Intraday high hit 42.83:$1, while intraday low settled at 42.97:$1. Volume of trade reached $1.058 billion from $1.258 billion previously.
The peso weakened to the 43-to-a-dollar level just earlier this week, but traders said it immediately got back to the 42-to-a-dollar territory amid expectations of more liquidity in the months ahead should the US Fed actually inject more funds into the US economy.
Any move by the US Fed to inject more funds into the US economy, a move defined as “quantitative easing 3 [QE 3],” would make more funds available for investments. Traders said some of these funds were believed to be used to purchase securities issued from emerging markets like the Philippines.
Higher investments would cause the peso to rise further in the months ahead, traders said, and some investors decided to take advantage of this projection by already buying peso-denominated assets. This caused the peso to rise on Thursday, they said.
The US Federal Reserve had already implemented first two rounds of injection of funds through bond purchases into the US economy, QE1 and QE2, with the aim of accelerating the rather timid growth of the US economy.
While the US Fed earlier hinted the end to its stimulus measures, it signaled this week that it might do another round of QE as the US economy still needed more boost.
