P40-$1 seen by next year

December 26, 2007  --  Got something to say?
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Phiippine Peso
MANILA Theres more bad news for overseas Filipino workers!
Because of the surge of their dollar remittances to the Philippines and foreign investments, the peso continues to strengthen and now nears the P41-$1 level. Currency experts now predict that the exchange rate could even reach P40 to $1 in 2008.

Weeks ago, the peso continued to rally, broke the psychologically important level of 41-to-a-dollar as it settled at 41.72 due to strong inflows from investments as well as remittances from overseas Filipino workers (OFWs). Foreign exchange inflows that had to wait over the long weekend continued to boost the peso against the dollar, with OFW remittances picking up even more momentum towards the holidays.

The peso opened at 42.350 to $1 at the beginning trade middle of last week and went steadily up to its closing rate of 42.120 to the dollar which was also the intra-day high.

Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said the peso would have been significantly stronger without the measures taken by BSP that eased foreign exchange outflows.

According to Tetangco, the appreciation of the peso worked in favor of the economy, first by allowing the build up in the countrys international reserves and creating a room for more flexibility in debt management.

The International Monetary Fund (IMF) said the intervention of the BSP in the currency market has done little to slow down the peso and would have little effect on future appreciation.

Foreign exchange practitioners said the peso soared to a new peak in seven and a half years on the back of the combined effects of the avalanche in dollar remittances from overseas Filipino workers (OFWs) and banks unloading their holdings of the American currency.

Forex (foreign exchange) practitioners are unanimous in saying that the peso will continue to strengthen because of the heavy OFW remittances that will continue running up to the Christmas holiday.

As a result, families of OFWs are feeling the pinch of a strong peso and a weak US dollar as they make their Christmas shopping.

The Manila Bulletin, for example, cited the complaint of Marlene Isleta who said she has less cash in her pocket after receiving the remittance money her husband, a waiter on a luxury cruise ship, sends her every month.

The money is really tight. Christmas is just another day for me. Ill be hiding from my godchildren that day,” she said, on a break from her office job in Manilas financial district.

Isletas husband is one of an estimated 8 million Filipinos, or around 10 percent of the population, who work overseas due to a lack of opportunities at home and whose remittances have driven the domestic economy to a 20-year high.
The Philippines is the fourth-largest recipient of remittance in the world after India, Mexico and China.

The overseas workforce, known locally as OFWs (Overseas Filipino Workers), and treated to their own visa line at Manilas international airport, have fuelled a local spending boom through their payments, estimated to hit a new record of $ 14.7 billion this year, 15 percent higher than last years peak.

The monthly inflows have also made the peso Asias best performing currency this year, up nearly 15 percent against the dollar.

But this means that overseas workers foreign currency salaries are translating into less pesos and these workers are having to send home more money every month to provide the same amount of pesos for their families fixed monthly budgets.

Many remittances into the Philippines still come from the United States, but there are also significant flows from countries which have a dollar peg, such as Hong Kong and Gulf states.

The peso has also risen over 8 percent against sterling since the start of the year and two percent against the euro.
To make ends meet, Filipinos based overseas are taking on second jobs, working overtime or getting loans. Back home, families often have to cut back on spending.

The Bulletin continued: In Manteca California, Donato Tino works overtime at two jobs to send an extra $ 200 a month home to his wife and two children.

The 38-year-old works in a petrol station and an electronics firm. In the Philippines, he was an X-ray technician but he would need to retrain to get employment in a US hospital.

I dont have time to study. I have to work and work, Tino said in a telephone interview.
The central bank has tried to temper the pesos rise but it has run up its biggest loss in over a decade doing so and the cost of keeping the currency in check is now too expensive.

The government has cut wharfage fees and removed travel tax for exporters but its little consolation and exporters have slashed growth estimates for this year to 4.5-5.5 percent from an original forecast of 10 percent.


Posted by News Team | Filed Under Articles/Stories 

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