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smokey

Why Does The Peso Keep Getting Stronger

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smokey

ok i admit it did not finish high school.

Philippines i read is expecting 500,000 OFW to lose jobs and will affect remittances   unemployment at 45%  longest lockdown in world but the.peso keeps getting stronger why 

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Ozepete

I didn't finish high school either. Once I got to legal '*feck off' age I left, besides it was about time I learn't something!  (*Actually won the DCM award!) 

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to_dave007
35 minutes ago, smokey said:

philippines i read is expecting 500 .000 ofw to lose jobs and will affect remittances   un employment at 45%  longest lockdown in world but the.peso keeps getting stronger why 

who knows..

I also don't know why the markets are so strong.

everything seems upside down.

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BossHog

One key reason amongst many that the peso is strong(er) is that there's less money being spent on foreign currency to buy imports.

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govoner

Why is the peso so strong?

By: April Lee-Tan - @inquirerdotnet

Philippine Daily Inquirer / 04:04 AM May 04, 2020

The peso has always been vulnerable to past crises.

During the Asian Financial Crisis in the late ‘90s, the peso depreciated to 56 from around 26 against the dollar. During the 2008 Global Financial Crisis, it weakened by around 14 percent.

Today though, the peso remains relatively stable, trading at the 50 to 51 per dollar range despite the new coronavirus disease (COVID-19) crisis. Other Asian and emerging market currencies are depreciating sharply, making the peso one of the best performing currencies this year.

The peso’s surprising stability begs the question: What has changed? Compared to the past, one of the major changes responsible for the peso’s strength is the government’s much lower debt obligation relative to the gross domestic product (GDP).

Although the absolute amount of our government’s debts has been going up, it is equivalent to only 41.5 percent of GDP as of the end of last year from a peak of 71.4 percent of GDP in 2003.

The Philippines’ debt-to-GDP ratio also compares favorably to those of other countries in Asia like Singapore (126 percent), Vietnam (57.5 percent), Malaysia (51.8 percent) and China (50.5 percent). In fact, even if we are just a developing country, our ratio is better compared to those of many developed countries including Japan (238 percent), the US (107 percent) and the UK (80.8 percent).

Our government was able to reduce its debt-to-GDP ratio by increasing tax revenues and limiting deficit spending. For example, in 2006, the government increased the value-added tax rate to 12 percent from 10 percent despite it being a highly unpopular move. Moreover, since 2011, the government has kept its budget deficit below 3 percent of GDP.

Another important change over the years that helped prop up the peso is the significant decline of our government’s dependence on foreign debts. From a peak of more than 70 percent in the early 2000s, the Philippines’ external debt-to-GDP ratio has fallen to 23.3 percent by end-2019.

Our country’s gross international reserves (GIR) or dollar holdings have also increased to very comfortable levels. As of end-March this year, our GIR was $88.9 billion. This is enough to cover 7.9 months’ worth of imports and more than three times the amount of our country’s external debt obligations in the next 12 months.

The Philippines’ healthy GIR is largely attributable to the strong growth of the business process outsourcing (BPO) sector and remittances from overseas Filipino workers (OFWs).

Note that revenues of the BPO sector have increased dramatically to around $26 billion last year from only $1.3 billion in 2004. In contrast, there were hardly any BPOs during the 1990s.

Meanwhile, the value of OFW remittances has grown tremendously to around $30.1 billion in 2019 from around only $5 to 6 billion during the latter part of the 1990s.

The strong growth of the BPO sector and OFW remittances has allowed the Philippines to consistently post a current account surplus for several years beginning in 2003 as we finally earned more dollars than we needed.

Given the Philippines’ improving finances, it is no wonder then that the government was able to raise $2.35 billion last month by selling 10-year and 25-year bonds yielding only 2.457 percent and 2.95 percent, respectively. The bonds were more than 4.5 times oversubscribed.

Still, the peso also faces some risks in the near term.

OFW remittances, which is one of our major sources of dollars, could fall this year given the significant decline in oil prices and the negative economic outlook for the global economy.

Just recently, the Bangko Sentral ng Pilipinas (BSP) said it expected OFW remittances to fall by 0.2-0.8 percent.

The World Bank is even more pessimistic as it expects OFW remittances to contract by 13 percent in 2020.

The government also said it would resume the “Build, Build, Build” program once the economy reopens to stimulate economic growth. In fact, spending on the country’s banner infrastructure program could be much bigger in the next few years as lawmakers are proposing to give President Duterte special powers to expedite the completion of high-value projects.

While a more aggressive infrastructure spending program is good for economic growth, it will also lead to more importations.

Coupled with the expected decline in OFW remittances and the inevitable drop in tourism and export receipts, the risk of booking a current account deficit increases. 

Recall that in 2018, the peso weakened by as much as 9 percent as the government began spending aggressively on infrastructure projects, leading to a current account deficit.

Finally, our government’s finances will inevitably deteriorate because of the ongoing crisis.

Because of the significant decline in economic growth and the planned increase in government spending in the next few years, the budget deficit is projected to exceed 3 percent this year and even reach 7 percent next year. This will push our country’s debt-to-GDP ratio higher, making the peso less attractive to own, at least in the short term.

Despite the risks, I think the best scenario is for the peso to depreciate slowly over the next few years. That way, inflation can stay benign as the price of imports increases at a graduated pace.

Businesses will also be in a better position to make plans despite a weaker currency.

A weaker peso will also be good for Filipinos who are dependent on OFW remittances as the peso value of their remittances increases. It will also make the Philippines more attractive to foreign investors and will hopefully help the country attract more foreign direct investments. INQ

Read more: https://business.inquirer.net/296358/why-is-the-peso-so-strong#ixzz6X2LLMr9C

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battleborn

The above article is about a weaker piso.  It has become stronger against the dollar since May.

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baby43

Hey Smokey I did not Finish High School Either, my dad had a job lined up for me as soon as I turned 15, in those days we were a very poor family had to work for family to make ends meet. 

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Headshot

Currencies and stock markets are manipulated by the very rich and powerful (not to be confused with national leaders although in some cases they could be the same). That is true regardless of what country you are talking about. It is in their best interest to keep relative stability in both currency exchange rates and stock prices. Therefore, you shouldn't expect instability in currencies or stocks unless things spiral so far out of control that those who manipulate currencies and stocks can no longer compensate for the changes. We obviously haven't reached that point yet.

Edited by Headshot
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Davaoeno
6 hours ago, battleborn said:

The above article is about a weaker piso.  It has become stronger against the dollar since 

29 minutes ago, Headshot said:

Currencies and stock markets are manipulated by the very rich and powerful (not to be confused with national leaders although in some cases they could be the same). That is true regardless of what country you are talking about. It is in their best interest to keep relative stability in both currency exchange rates and stock prices. Therefore, you shouldn't expect instability in currencies or stocks unless things spiral so far out of control that those who manipulate currencies and stocks can no longer compensate for the changes. We obviously haven't reached that point yet.

 

Thanks for explaining that to us. Could you please tell us the names of " the very rich and famous"    who are controlling " the currencies and stock markets" in the following countries:

1. Philippines

2. USA

3.  Canada

 

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rfm010
12 hours ago, Davaoeno said:

Thanks for explaining that to us. Could you please tell us the names of " the very rich and famous"    who are controlling " the currencies and stock markets" in the following countries:

1. Philippines

2. USA

3.  Canada

 

1.  George soros.

2.  George soros.

3.  George soros.

 

 

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smokey

i was thinking the billions of dollars borrowed this year could it be when check is cashed it drives up peso ? As to less spent on imports true but dint they factor in the reason like exports down so raw material not needed 

oh the vat gloria say we need to tax all goods to help our country but its only 10% and for a short time   ha ha ha ha

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Mattnlenny

Rather than thinking of the peso getting stronger, you should consider that the dollar is getting weaker. It is being largely diluted with excessive currency creation. 

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Headshot
27 minutes ago, rfm010 said:

1.  George soros.

2.  George soros.

3.  George soros.

It would be nice if the answer was that simple, but it seems like George Soros would like more chaos, not less. If you want to know who controls things in each country, look at the "old" money, not the new. I will certainly not get into the specifics of that in the open forums.

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Ozepete
2 hours ago, Headshot said:

Currencies and stock markets are manipulated by the very rich and powerful (not to be confused with national leaders although in some cases they could be the same). That is true regardless of what country you are talking about. It is in their best interest to keep relative stability in both currency exchange rates and stock prices. Therefore, you shouldn't expect instability in currencies or stocks unless things spiral so far out of control that those who manipulate currencies and stocks can no longer compensate for the changes. We obviously haven't reached that point yet.

No.  Currencies and stock market values are determined by market forces. Those values vary as an assets worth is determined by the various market forces at the time.  To suggest otherwise is to misunderstand commercial reality and the immensity of capital and stocks.

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Dutch

PH's debt is actually very much at an acceptable level.

On top of that, the economy is in a developing stage, which mainly attracts higher risk investors (betting on higher reward).

On the other side you also have jpow printing ridiculous amounts of money to keep the US stock market from caving in, so USD is also losing a lot of value.

Trend will probably continue until next US election, federal reserve's strategy is unsustainable as is.

Calling forex and stock market manipulated by the very rich is not understanding the basics of supply and demand.

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battleborn
15 hours ago, Davaoeno said:

Thanks for explaining that to us. Could you please tell us the names of " the very rich and famous"    who are controlling " the currencies and stock markets" in the following countries:

1. Philippines

2. USA

3.  Canada

 

Is this a test?  Or are you displaying your funny side.

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bounder

I had read somewhere that the value of the dollar was going down worldwide as investors were switching to buying the euro over the dollar.  I wish I had kept the article, but....  However, it sounds possible to me.  

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HeyMike
16 hours ago, Davaoeno said:

Thanks for explaining that to us. Could you please tell us the names of " the very rich and famous"    who are controlling " the currencies and stock markets" in the following countries:

1. Philippines

2. USA

3.  Canada

 

The Bilderbergs, the Rothschilds, the Rockefellers, the Bush family, the Queen of England, and the cryogenized severed head of Walt Disney

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Headshot
17 hours ago, Ozepete said:

No.  Currencies and stock market values are determined by market forces. Those values vary as an assets worth is determined by the various market forces at the time.  To suggest otherwise is to misunderstand commercial reality and the immensity of capital and stocks.

Usually I would agree with you, but that doesn't explain what has been happening in 2020. The markets would (and should) have crashed due to the major economic downturn and huge jumps in unemployment caused by government reactions to the pandemic ... and yet it hasn't. Many small businesses have folded and millions of jobs have disappeared, maybe to never return, and yet the markets rise. Global supply chains have disappeared, and companies cannot supply product, but the markets continue to rise.

Give me a logical explanation other than the fact that the Federal Reserve and other central banks have been pumping huge amounts of cash into the markets. The Federal Reserve isn't an elected group of people. It is a club made up of elites and their representatives. They are protecting their wealth. Yesterday, US stock exchanges took their biggest downward hit in a long time.

US stock equities are currently valued at 2100 when they should be valued at between 1200 and 1300 based on companies' actual sales, production and profit numbers. So, let's see what happens. Will the Federal Reserve step in again and "save" the market, or will they let it crash with the elites still on-board? Or have the elites already jumped out of the market while it was being pushed up and are hoping the market crashes now so they can jump back in at a much lower point? We'll see, but so far the story for 2020 has been a huge redistribution of wealth toward the top 1%. The other 99% can blow in the wind as far as they are concerned.

 

Edited by Headshot

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seanm

In the USA, the fed and quantitative easing is what has propped the market to what it is imo. Headshot is right that this has helped those with a lot of wealth. The fed devalues the dollar and those with the vast majority of their wealth in stocks/property do not care (those who hold USD do care). 

There are various ETFs that one can buy to bet against the market going up. My friend just bought SPXS, which is a 3x fade of the S&P. He thinks no matter who wins the presidential election the market is in for rough times...

We will see.... I just hope the USD doesn't fall too far from around 50 vs the PHP

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Kreole

As you may have noticed, with the rise of the USD over the peso in the last 3 years, there has been a compensatory rise in prices for goods and services.  However, as the USD weakens, the prices will not go down; they never do.  It reminds me of 40 years ago in the US when bad weather ruined the avocado harvest in the south, and the prices skyrocketed.  The following year and thereafter, as the harvest returned to normal and above, the prices remained at their higher level, never to return to the base price before the bad harvest, no matter the abundant supply. 

Moreover, the devaluation of the USD is a deliberate policy to cut the interest the US has to pay on its growing foreign debt.  Nothing new.  The only variable that may offset this trend is the continuing downward economic situation in the RP due to the quarantine / lockdown.  And, as I understand it, there will be no quick or sustainable recovery after so much economic value has been deliberately destroyed, exactly as it has been predicted by more rational "experts".  So, the devaluation of the Philippine peso may be only temporarily stalled.  I hope, I hope.

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rfm010
17 hours ago, Kreole said:

... So, the devaluation of the Philippine peso may be only temporarily stalled.  I hope, I hope.

Some of us derive our income here and arent all that keen on depreciating pesos.  

Fwiw, the current central banker has a mindset favoring stability to a slightly depreciating peso over time that would help the export sector.  So you're probably in luck.

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papimafioso69

I’d imagine the price of gold just under 2,000 a ounce has something to do with it . It’s still better than 42 when I first visited the Philippines . Been reading  articles for 8 years or more saying gold will hit 2,000 and they were right . 

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smokey

Well i think until the open land rights here not much chance of becoming a manufacturing hub even with low cost labor well and the mega high electric rates and as the virus was world wide the almost 1 million ofw who lost their jobs will now be looking local and using government bennies   i expected the peso to creep toward 53 but to my surprise it went south and i too earn in peso and dollars   pension in dollars    rentals in peso 

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wondersailor
On 9/4/2020 at 8:11 PM, Ozepete said:

No.  Currencies and stock market values are determined by market forces. Those values vary as an assets worth is determined by the various market forces at the time.  To suggest otherwise is to misunderstand commercial reality and the immensity of capital and stocks.

Yah, I don't have a clue why either.

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