Peso rises on reports of US Federal Reserve’s new moves

AFP PHOTO/ROMEO GACAD

MANILA, Philipppines—The peso rose on Tuesday amid speculations the US Federal Reserve may implement another round of stimulus measures to boost the US economy, which continues to struggle with sluggish growth.

The local currency closed at 41.725 against the US dollar, up by 13.5 centavos from the previous day’s finish of 41.86:$1.

Intraday high hit 41.70:$1, while intraday low settled at 41.80:$1. Volume of trade amounted to $789.86 million from $870.14 million previously.

The appreciation of the peso, which happened together with the rise of other key Asian currencies, came amid speculations US Federal Reserve chairman Ben Bernanke would hint in a speech an injection of more stimulus funds to the US economy.

Bernanke is set to deliver a speech before members of Congress on Wednesday about the Fed’s economic outlook and update on US monetary policy.

Speculations of another round of stimulus were anchored on a report that retail sales in the United States fell in June from a year ago.

Traders said fund owners expected the drop in US retail sales to prompt the US Fed to inject more funds into the US economy. Lower retail sales supported the view that recovery of the United States from the 2009 recession has been slow, traders said.

Injection of funds to the US economy is seen boosting overall liquidity in the global economy. As what happened in the past, some of fresh funds injected by the US Fed may be used by recipients to invest in emerging-market securities, such as peso-denominated stocks and bonds.

Expectations that investments in emerging-market assets would increase led to projections that emerging market currencies would appreciate.

Traders said the projection that emerging-market currencies would increase led to higher demand by profit-seeking investors for emerging-market assets in Wednesday’s trading, thereby actually causing the currency appreciation.