Peso rises anew over news of fresh US Federal Reserve stimulus

AFP PHOTO

MANILA, Philippines—The peso inched up on Thursday as speculations of more measures from the US Federal Reserve to stimulate the US economy boosted appetite for emerging market securities.

The local currency closed at 42.095 against the US dollar, up by 9 centavos from the previous day’s finish of 42.185:$1.

Intraday high hit 42.06:$1, while intraday low settled at 42.13:$1. Volume of trade amounted to $780.88 million from $993.6 million previously.

The rise of the peso came amid market speculation that the US Federal Reserve may inject additional liquidity to help speed up recovery of the world’s biggest economy. These speculations came about amid indicators showing that US economic performance remains weak.

Should the US Fed inject additional liquidity, the market expects portions of this to be used by recipients to purchase emerging market securities, such as peso-denominated stocks and bonds. A rise in demand for these securities is expected to cause appreciation of emerging-market currencies.

Traders said fund owners who would like to take advantage of earnings potential from appreciation of emerging-market currencies opted to buy these currencies early. Consequently, the currencies of emerging markets indeed increased, market players said.

The rise of the peso also came following the release of a report showing that Philippine imports rebounded in May, registering a 10-percent year-on-year growth to $5.39 billion.

Given that growth was driven partly by the increase in importation of raw materials and capital goods, some economists predict that the rise in imports indicate that firms are expecting a rise in demand for their goods.

Higher imports were thus considered to be signaling potentially sustained rise in economic activity in the Philippines in the months ahead.