Peso trend on or before Christmas of 2010

8/7/2019 Peso trend on or before Christmas of 2010

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Peso trend on or before Christmas of 2010:

When the United States Dollar-Philippine Peso Exchange rate was hovering at around P44+ to a dollar,

Filipino businessmen who have dollar savings started to withdraw, exchange them to Philippine Peso and

place it in mutual funds. Experts who give out a fearless forecast predict a 37 to 1 exchange rate by the 1st

quarter of 2008. The more conservative ones say it will be P 39 to a dollar by 2008. However, most of

them agree that it will be in the P 30 ++ level by 2009. There are those who give higher than P 35

production, others lower say it is lower than that.

Most likely, the Philippine Peso will keep on getting stronger in the coming months because of these

reasons:

1.) Basic economic principle of supply and demand - More supply of dollars means the dollar becomes

cheaper. In the same way the less demand there is for dollars, the cheaper it becomes. What could be the

reason why the Philippines have an oversupply of U.S dollars? The following reasons could provide a

clue:

a.) Rise in Overseas Foreign workers (OFW) remittances - Out of the more than 80 million Filipinos, anestimated 8 million 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.) Increase in Tourists spending - The Department of Tourism reports that Tourist arrival increased 8.6

percent from a year earlier. This translates to 2.5 million additional tourists. Tourists spend a lot of money

while they are in the country. This helps increase the supply of U.S dollars in the country.

d.) Export earnings - Exports has also grown despite the appreciation of the Peso. However the growth in

this sector is led by Business Process Outsourcing business and not the traditional business. The

Philippines remain to be one of the favorites when it comes to Business Process outsourcing.

e.) Political stability - People are tired of political bickering, political mudslinging and engaging in

activities that call for the resignation of the president. It cannot be denied that the existing administration

has maintained its grip and influence creating a somewhat stable political 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 have been causing the U.S dollar to

further weaken. This factor helped push the Peso upward.

As I review the previous years, the year 2007 closed with the Peso being named as the ³Best Performing

Currency in Asia.´ It is said to have gained about 18 % against the U.S dollar. This trend is more likely to

continue and a stronger peso is very much more likely in the month or even years to come, as being

shown in the graph below.



The graph below shows historical exchange rates between the Philippine Peso (PHP) and the US Dollar

(USD) between 9/4/2010 and 3/2/2011.



The graph below shows historical exchange rates between the Philippine Peso (PHP) and the USDollar (USD) between 4/30/2010 and 3/3/2011.

Source of Historical Graph Data:

History ExchangeReport

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Peso trend on or before Christmas of 2010