Feb. 22 (Bloomberg) -- The Philippine peso erased losses after the stock market rallied and the central bank signaled it has room to support economic growth even amid higher oil prices.
The Philippine Stock Exchange Index climbed 0.7 percent after losing 0.9 percent yesterday. The peso earlier dropped as much as 0.5 percent on concern rising fuel costs will re-ignite inflation and as a second bailout for Greece failed to bolster confidence among investors over the state of euro-area finances.
“With the stock market up, this helped the market stabilize,” said Rafael Algarra, executive vice president of financial markets at Security Bank Corp. in Manila. “When the day started market concerns were oil prices and the Greece situation.”
The peso closed at 42.630 per dollar in Manila, compared with 42.645 yesterday, according to Tullett Prebon Plc. The currency earlier touched 42.875, the lowest level in almost a week. The yield on the government’s 5.875 percent bonds due February 2032 increased seven basis points, or 0.07 percentage point, to 6.06 percent, according to noon fixing prices from Philippine Dealing & Exchange Corp.
Crude reached a nine-month high of $106.41 a barrel in New York today due to the threat of a disruption to supplies from Iran. Consumer prices in the Philippines rose at the slowest pace in January in more than a year, providing room for the central bank to cut interest rates. The Southeast Asian nation buys almost all its oil requirement from overseas.
“Our assessment is, under specific stressed oil price levels, inflation would be elevated but the full-year inflation average would be within target,” central bank Governor Amando Tetangco said in an e-mail today. The official inflation target this year is 3 percent to 5 percent
Consumer prices climbed 3.9 percent last month from a year earlier, slowing from 4.2 percent in December, official data show. The inflation rate reached 5.2 percent in October and June, the highest since April 2009. Policy makers lowered borrowing costs on Jan. 19 by 25 basis points, or 0.25 percentage point, to 4.25 percent.
European officials awarded 130 billion euros ($172 billion) in aid to Greece this week after it signed up to a program of austerity and economic reforms that threaten to intensify street protests, with unemployment running at almost 21 percent.
--Editors: Simon Harvey, Ven Ram
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