Warning aired on strong peso (from Philippine Star)
The Philippine Peso has been in its highest for more than six years. Last week, the peso closed at 41.74. So it's a good thing. Well, not completely.
The strong peso is hurting the very same hands that feed it. Note that OFW remittances are one of the country's main source of dollars. Now that the currency's improving, exhange rates are changing. A couple of months ago, 100USD would be equivalent to about Php4500. But due to the rapid improvement of the peso, 100USD is now about Php4200. That's 300 bucks difference. Multiply that amount by thousands, and the loss would be in the thousands (or millions), too.
And that's only for OFWs and their families. There are still the exporters.
True, though, it's not only the strengthening of the economy which is a factor of what's been happening. The US economy has been going down quite recently due to the fall of the real estate industry. The interest rates of the US is down, thus currencies around the world against (can't think of a more apt term) the greenback naturally would strengthen.
However, what's happening at the other side of the globe is beyond the control of our country.
But isn't a strong peso supposedly a good thing for our country? It is, only if we are prepared for it. The sudden upsurge is something that our economy is not prepared for. Apparently, our financial institutions have been concentrating on keeping the dollars within the country; they've been trying to protect the dollars from leaving the country. But now that we're getting a lot of dollars, we don't know what to do with it. In other words, the cash's idle. We don't have that many programs/portfolios that actually invest the dollars outside the country, which is pretty much what financial institutions should do if they have large stores of USD. There's too much influx, with little time of adapting to the situation. It's like having an opponent AC in charging status, yet you don't know if you should rush-in and blade'm, DFA, or spam whatever. Before you realize it, the opponent's bar is recharged. The rest follows; you get the point.
Why invest the greenback? We can always wait till the US returns to its tracks. Well, the superpower won't be too super financially within probably the next 1-2 years. So the target markets are Europe and East Asia. Waiting for that time is equal to lost opportunities and profit.
However, having a strong peso is not a bad thing. If it weren't for it, we'd probably be paying 50 bucks per liter of premium gasoline as of now. The upping of our currency has helped dampen the effect of the also increasing inflation rates. And there are more ups mentioned in the article above.
BSP has similarly cut its rates (like the US Treasury) to level the increase of the peso. If it didn't, well, I dunno, we'd probably be in the 1USD: Php40 region as of now. And that'd cause more trouble.
So what now? Well, the peso will continue to rise. The OFWs will still continue remitting their cash. Whether they like it or not, they would since their families here in the country need the cash. The government will still continue to improve our economy, since in the long run, we would feel the benefits of what's happening now.
Short-term to mid-term benefits might not be obvious. But in overall view of things, this is, theoretically, a good thing for our country.
Do we want a strong peso? Yes, definitely. Only if we put this opportunity into good use. Otherwise, save it for another day.
The Philippine Peso has been in its highest for more than six years. Last week, the peso closed at 41.74. So it's a good thing. Well, not completely.
The strong peso is hurting the very same hands that feed it. Note that OFW remittances are one of the country's main source of dollars. Now that the currency's improving, exhange rates are changing. A couple of months ago, 100USD would be equivalent to about Php4500. But due to the rapid improvement of the peso, 100USD is now about Php4200. That's 300 bucks difference. Multiply that amount by thousands, and the loss would be in the thousands (or millions), too.
And that's only for OFWs and their families. There are still the exporters.
True, though, it's not only the strengthening of the economy which is a factor of what's been happening. The US economy has been going down quite recently due to the fall of the real estate industry. The interest rates of the US is down, thus currencies around the world against (can't think of a more apt term) the greenback naturally would strengthen.
However, what's happening at the other side of the globe is beyond the control of our country.
But isn't a strong peso supposedly a good thing for our country? It is, only if we are prepared for it. The sudden upsurge is something that our economy is not prepared for. Apparently, our financial institutions have been concentrating on keeping the dollars within the country; they've been trying to protect the dollars from leaving the country. But now that we're getting a lot of dollars, we don't know what to do with it. In other words, the cash's idle. We don't have that many programs/portfolios that actually invest the dollars outside the country, which is pretty much what financial institutions should do if they have large stores of USD. There's too much influx, with little time of adapting to the situation. It's like having an opponent AC in charging status, yet you don't know if you should rush-in and blade'm, DFA, or spam whatever. Before you realize it, the opponent's bar is recharged. The rest follows; you get the point.
Why invest the greenback? We can always wait till the US returns to its tracks. Well, the superpower won't be too super financially within probably the next 1-2 years. So the target markets are Europe and East Asia. Waiting for that time is equal to lost opportunities and profit.
However, having a strong peso is not a bad thing. If it weren't for it, we'd probably be paying 50 bucks per liter of premium gasoline as of now. The upping of our currency has helped dampen the effect of the also increasing inflation rates. And there are more ups mentioned in the article above.
BSP has similarly cut its rates (like the US Treasury) to level the increase of the peso. If it didn't, well, I dunno, we'd probably be in the 1USD: Php40 region as of now. And that'd cause more trouble.
So what now? Well, the peso will continue to rise. The OFWs will still continue remitting their cash. Whether they like it or not, they would since their families here in the country need the cash. The government will still continue to improve our economy, since in the long run, we would feel the benefits of what's happening now.
Short-term to mid-term benefits might not be obvious. But in overall view of things, this is, theoretically, a good thing for our country.
Do we want a strong peso? Yes, definitely. Only if we put this opportunity into good use. Otherwise, save it for another day.
"Numbers are not part of the real world; they're part of something else."
-Prof. Rolly Panopio, UPLB Math Division
-Prof. Rolly Panopio, UPLB Math Division
