Peso rises on reports of US Federal reserve stimulus

US dollar (L) and Philippine notes (R). AFP PHOTO

MANILA, Philippines—The peso inched up on Thursday as expectation that the US Federal Reserve would move to stimulate the US economy boosted appetite for emerging market assets.

The local currency closed at 42.11 against the US dollar, up by 18 centavos from the previous day’s finish of 42.29:$1.

Intraday high hit 42.1:$1, while intraday low settled at 42.215:$1. Volume of trade amounted to $1.089 billion from $957.9 million previously.

The rise of the peso came following the release of reports that the US Federal Reserve has been considering engaging in another round of bond purchases as a means to inject liquidity and to stimulate the still lackluster performance of the US economy.

The United States is one of the biggest export markets for the Philippines and other emerging economies. It is also a major source of foreign direct investments and is home to many migrants, whose remittances help fuel consumption of Filipino households.

Efforts to boost the US economy, therefore, would help improve the outlook of investors on the Philippines and other emerging economies as well, traders said.

The rise of the peso also came following the release of a report showing that the Philippine national government’s budget deficit stood at P73.73 billion in the first seven months of the year.

This was up from P43.71 billion in the same period in 2011, but is moderate enough to help the full-year deficit stay within the ceiling of P276 billion.

Economic officials said the government’s manageable deficit situation has helped promote investor confidence.