Peso up over news on eurozone debt, lower PH interest rates

MANILA, Philippines—The peso inched up further on the second trading day of the week as ongoing discussions to solve the debt crisis in the eurozone and likelihood of lower domestic interest rates prompted investors to buy Philippine assets.

The local currency closed at 44.01 against the US dollar on Tuesday, up by 10 centavos from 44.11:$1 on Monday.

Due to the strong appetite of fund owners, the peso broke into the 43-to-a-dollar territory in midday trade to hit an intraday high of 43.87:$1. Intraday low settled at 44.07:$1.

Trading in the foreign exchange market remained brisk, with the volume of trade staying above the $1 billion threshold to amount to $1.19 billion. This was, however, down from $1.33 billion previously.

The rise of the peso came amid talks by European policymakers on how to more firmly address the debt crisis in the eurozone and prevent it from causing a recession in the Western region. A recession in the eurozone is feared to drag growth even of emerging markets like the Philippines.

Traders said ongoing discussions over the eurozone problem has been somewhat easing the concerns of fund owners.

In the meantime, they said, the expectation that domestic interest rates would decline has been lifting sentiment of investors on the Philippine economy.

The Bangko Sentral ng Pilipinas has hinted it may cut its key policy rates, which influence commercial interest rates, within the first quarter as a means to boost economic growth and temper the ill-effects of the eurozone woes.

Lower interest rates are seen to help prop up demand for loans, which in turn support consumption and investments.