THE Philippine peso rose from a 17-month low on speculation economic growth will improve after the central bank signaled it might join policymakers in the US, Europe and Asia by cutting interest rates. Bonds fell.

The peso had its biggest gain in almost three weeks after Central Bank Governor Amando Tetangco Jr. said yesterday the coordinated interest-rate cuts by the world’s major central banks gave him and fellow policymakers “greater monetary policy space.” Slowing inflation also gives the central bank room to lower borrowing costs, Tetangco said.

“A rate cut will help spur growth in the Philippines and that’s what the market is looking at now,” said Vishnu Varathan, a Singapore-based economist at Forecast Pte. “The rate cuts offer a sense of relief and, for the meantime, that’s what markets care about.”

The peso climbed 0.8 percent to P47.39 versus the dollar at the 4 p.m. close of trading, according to the Bankers Association of the Philippines. The gain was the biggest since September 19.

“We will continue to monitor the evolving situation to make sure our assessment is fresh and our policy stance appropriate,” Tetangco said in mobile-phone message from Washington.

The annual inflation rate slowed to 11.9 percent in September, from a 16-year high of 12.5 percent in August, the National Statistics Office said on October 7. Economic growth may ease to as little as 3.8 percent this year, from 7.2 percent in 2007, Finance Secretary Gary Teves said on September 30.

“This process of healing, of detoxification, takes time but it’s something that’s needed to bring back confidence in markets,” said Marcelo Ayes, senior vice president for treasury at Rizal Commercial Banking Corp.

The peso may gain further as remittances from Filipinos working overseas start to increase in the approach to Christmas, Ayes said.

Seven-year government bonds fell for a third day.

The yield on the 11.875-percent note due August 2015 rose 13 basis points to 7.85 percent, according to the 11:15 a.m. fixing at Philippine Dealing and Exchange Corp. The price fell 0.77, or P77 per P10,000 face amount, to 121.04. A basis point is 0.01 percentage point. (Bloomberg)

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