The Philippine peso rebounded against the dollar on Thursday as global risk sentiment improved after the United States pledged support for the bond market to help stem surging yields.

The currency gained 14.5 centavos to close at P61.67 versus the greenback, strengthening from its P61.815 finish on Wednesday, according to data from the Bankers Association of the Philippines' website.

The local unit opened Thursday's session stronger at P61.70 per dollar, which was already its weakest showing of the day, and reached an intraday high of P61.49 against the greenback. Dollars exchanged climbed to $2.115 billion from $1.888 billion previously.

Philippine financial markets are closed on Friday for the Ninoy Aquino Day holiday, so the peso's next session will offer the first read on whether the improved global risk sentiment endures.

Dollar slips on Treasury buyback plan

The peso's rise followed the dollar's overnight correction after the US Treasury announced a buyback plan for long-end bonds, a trader said by phone.

The US dollar was pinned near a three-month low on Thursday after the Treasury Department moved to calm a bond market selloff that had pushed long-end yields to their highest since 2007, lifting risk sentiment and undercutting the currency, Reuters reported.

The dollar index, which measures the dollar against six other currencies, stood at 98.723, its lowest level since May 14. The euro was at $1.1692, perched at its highest level since mid-May.

Broad dollar softness of this kind typically eases pressure on emerging-market currencies such as the peso, which has been trading at record-low levels against the greenback in recent weeks.

ING global head of markets Chris Turner said the Treasury's move to increase buybacks of Treasury securities with maturities between 10 and 30 years should reassure markets that longer-dated bonds are unlikely to face a disorderly selloff.

Bond market under strain

Investors have been grappling this week with a sharp selloff in the global bond market amid mounting concern about soaring government debt and the prospect of higher oil prices due to the lack of progress in ending the US-Israeli war with Iran.

The 30-year Treasury yield rose to a 19-year high of 5.337% earlier this week. It was last at 5.198% after dropping 9 basis points following the Treasury's move, which effectively shifts more of the government's borrowing toward short-term bills.

Possible central bank support

The peso could also have been supported by possible central bank intervention after it nearly breached the P62 level on Wednesday, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

On Wednesday, the currency hit an intraday low of P61.995, breaching the previous trough of P61.85 and the record-low close of P61.847, both logged on July 24.

Bangko Sentral ng Pilipinas Governor Eli M. Remolona, Jr. has said the central bank intervenes in the foreign exchange market to prevent inflationary swings and does not defend a specific level.

That inflation watch matters for households: the Philippines imports much of its fuel and food, which are priced in dollars, so a persistently weak peso raises the local cost of those goods and can feed into consumer prices. A softer peso also lifts the peso value of remittances from overseas Filipino workers, a steady source of household income and dollar inflows for the economy.

— Aaron Michael C. Sy with Reuters