Why The Philippine Peso Keep On Getting Stronger
Sometime last year, I told my dad to dump all his dollars, exchange it for peso and put it in mutual funds.This was the time when the United States dollar to Philippine Peso Exchange rate was still P44+ to a dollar.
The exchange rate is now nearing P 40.00 to a dollar. I really don't know if he listened to my advice.
More conservative experts say the exchange rate will be P 39 to a dollar by 2008. However other experts give the fearless forecast of 37 to 1 by the 1st quarter of 2008. Most of them would agree that it would stay in the P 30 +++ level by the year 2009. Some say it will be above 35 while others say it could be less than that.
One thing is certain though, the Philippine Peso will keep on getting stronger in coming months because of the following:
1.) The law of supply and demand - When demand is high prices goes up and when demand is low prices go down. The more supply of dollars there is, the cheaper it will be. The less demand of dollar there is, the price for getting dollars goes down also. And why is the supply of U.S dollars rising in our country? Consider this:
a.) Rise in Overseas Foreign workers (OFW) remittances - Out of the more than 80 million Filipinos, an estimated 8 million, have left the country to seek work overseas. The total number of Filipinos worldwide is estimated to be about 11 million. This trend is likely to continue and as this continues so will the flow of U.S dollars into the country further strengthening the Philippine Peso.
b.) Influx of more foreign capital - According to the Central Bank, foreign direct investments (FDI) from January to September 2007 aggregated to US$1.9 billion. This is higher by 22.3 percent compared to last year's US$1.6 billion (In the same period). Most Investors now see that the Philippines is good place due to the following reasons, effective Fiscal reforms implemented by the government, strong economic fundamentals, our growing business process outsourcing potential and liberalization of mining laws. Most of the foreign investments in the country went to mining, real estate and manufacturing. This is the reason why the stock market remains to be bullish, the inflation rate is low, and the GDP is high etc. This results to a good business environment for investors. More investors are expected to come in as this trend continues. As more "hot money" flows into the country, the supply of dollar continues to increase.
c.) Tourist spending - According to reports Tourist arrival rose 8.6 percent from a year earlier. This means an additional 2.5 million tourists. The money tourists spend in the country helps push higher the supply of U.S dollars in the country.
d.) Export earnings growth - Despite the fact that exporters are having a hard time due to a stronger Philippine Peso, the export sector has reported growth last year due to the increase of Business Process Outsourcing investment in the country. It cannot be denied that the Philippines is still to one of the best place to invest when it comes to business process outsourcing.
e.) Stability in politics - The Filipino people are tired of engaging themselves in activities to call for the resignation of the president. They are also sick of all these political bickering and political mudslinging. The government is maintaining a strong grip on the situation. This resulted to a more stable politcal environment.
2.) A weaker U.S dollar - While it is true that our strong economic fundamentals helped push the Peso upwards, it also cannot be denied that the Peso got a little help from the weakness of the U.S dollar. The economic problems of the U.S due to the sub prime mortgage crises has been causing the U.S dollar to futher weaken. This factor helped push the Peso upward.
The year 2007 ended with the Peso being nominated as the best performing currency in Asia. It gained about 18 % against the U.S dollar. Most likely this trend will continue. Expect a stronger peso more likely in the month or even years to come.
The exchange rate is now nearing P 40.00 to a dollar. I really don't know if he listened to my advice.
More conservative experts say the exchange rate will be P 39 to a dollar by 2008. However other experts give the fearless forecast of 37 to 1 by the 1st quarter of 2008. Most of them would agree that it would stay in the P 30 +++ level by the year 2009. Some say it will be above 35 while others say it could be less than that.
One thing is certain though, the Philippine Peso will keep on getting stronger in coming months because of the following:
1.) The law of supply and demand - When demand is high prices goes up and when demand is low prices go down. The more supply of dollars there is, the cheaper it will be. The less demand of dollar there is, the price for getting dollars goes down also. And why is the supply of U.S dollars rising in our country? Consider this:
a.) Rise in Overseas Foreign workers (OFW) remittances - Out of the more than 80 million Filipinos, an estimated 8 million, have left the country to seek work overseas. The total number of Filipinos worldwide is estimated to be about 11 million. This trend is likely to continue and as this continues so will the flow of U.S dollars into the country further strengthening the Philippine Peso.
b.) Influx of more foreign capital - According to the Central Bank, foreign direct investments (FDI) from January to September 2007 aggregated to US$1.9 billion. This is higher by 22.3 percent compared to last year's US$1.6 billion (In the same period). Most Investors now see that the Philippines is good place due to the following reasons, effective Fiscal reforms implemented by the government, strong economic fundamentals, our growing business process outsourcing potential and liberalization of mining laws. Most of the foreign investments in the country went to mining, real estate and manufacturing. This is the reason why the stock market remains to be bullish, the inflation rate is low, and the GDP is high etc. This results to a good business environment for investors. More investors are expected to come in as this trend continues. As more "hot money" flows into the country, the supply of dollar continues to increase.
c.) Tourist spending - According to reports Tourist arrival rose 8.6 percent from a year earlier. This means an additional 2.5 million tourists. The money tourists spend in the country helps push higher the supply of U.S dollars in the country.
d.) Export earnings growth - Despite the fact that exporters are having a hard time due to a stronger Philippine Peso, the export sector has reported growth last year due to the increase of Business Process Outsourcing investment in the country. It cannot be denied that the Philippines is still to one of the best place to invest when it comes to business process outsourcing.
e.) Stability in politics - The Filipino people are tired of engaging themselves in activities to call for the resignation of the president. They are also sick of all these political bickering and political mudslinging. The government is maintaining a strong grip on the situation. This resulted to a more stable politcal environment.
2.) A weaker U.S dollar - While it is true that our strong economic fundamentals helped push the Peso upwards, it also cannot be denied that the Peso got a little help from the weakness of the U.S dollar. The economic problems of the U.S due to the sub prime mortgage crises has been causing the U.S dollar to futher weaken. This factor helped push the Peso upward.
The year 2007 ended with the Peso being nominated as the best performing currency in Asia. It gained about 18 % against the U.S dollar. Most likely this trend will continue. Expect a stronger peso more likely in the month or even years to come.
About the Author:
Do you want to know more about investments ? Zigfred Diaz regularly blogs about several topics including finances and investments. If you would like to know more economic forecast that could affect investment decisions, visit his blog.
posted by Trilochan Bhattacharya @ 3:56 PM
| Del.icio.us |
DiggIt!|
FurlIt!|
ReddIt |
MyWeb |
0 comments
0 Comments:
Post a Comment
<< Home