RP peso gains after Australia slashes rates by 100 bps

MANILA, Philippines - The peso on Tuesday posted modest gains against the dollar, as a surprise rate cut by the Australian central bank stunned credit-squeezed financial markets. The local currency closed at P47.40 to the dollar, three centavos firmer than Monday’s finish, after volatile trading that saw it dipping to a one-and-a-half year low of P47.81 per dollar. It opened weak at P47.50 and managed a high of P47.38 per dollar. The peso’s rollercoaster ride was a tell-tale sign of investors’ unabated worries over a US-led global recession, traders said. Banks were decided on betting on the dollar amid rising risk-aversion, they said. The peso took comfort only from some profit-taking, as banks opted to unload part of their US currency holdings. A steep interest rate cut of one percentage point in the Reserve Bank of Australia’s benchmark rate relieved the jittery nerves of investors, who early in the week ignored Washington’s passage of a $700-billion bailout plan. That decision gave the peso a boost, traders said. "The market recovered because of the surprising cut by the RBA. It’s perceived as good, building confidence. It’s a sign of aggressiveness to counter the spreading crisis," a trader said. Volume of transacted dollars rose to $887.5 million from Monday’s $690.5 million. The central bank was believed to have stepped in to smooth out the volatility. — Maria Eloisa I. Calderon, BusinessWorld