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THE PESO broke into the 43-to-a-dollar territory yesterday, boosted by the improving risk appetite among foreign investors for debt instruments issued from the Philippines and other Asian countries.

 

The local currency hit an intraday high of 43.88 against the greenback, which traders said was the highest level since May 2008, before closing at the day

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TheMatrix

Just as I said last week:

 

"Traders said the strong movement of the peso was consistent with that of other Asian currencies, which are being buoyed by a generally favorable outlook on Asia, the region tipped to lead this year

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Fall baby baby fall. Christmas is 2.5 months awaybiggrin_01.gif

 

Really though, I think the central bank should let the market dictate.

 

 

Just as I said last week:

 

"Traders said the strong movement of the peso was consistent with that of other Asian currencies, which are being buoyed by a generally favorable outlook on Asia, the region tipped to lead this year's global economic growth."

 

However, the article suggests intervention might have occurred yesterday to prevent further strengthening. I think it's a little early, but the Central Bank won't be able to keep it propped forever and we just might see it reach 42.50 sooner then anticipated.

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Headshot

If you are an expat receiving your income in dollars and converting it to pesos, this is NOT good news. It is also NOT good news for international companies with operations in the Philippines because the cost of labor has just jumped. At some point, it is no longer worthwhile to have operations in the Philippines, and companies move their facilities elsewhere. Therefore, it is NOT good news for the Filipinos working for those companies nor the Philippine government, which depends on those companies to employ a significant percentage of the population.

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I think it's a little early, but the Central Bank won't be able to keep it propped forever and we just might see it reach 42.50 sooner then anticipated.

 

Until the PH central reserve prints a couple trillion pesos to help cover the government budget deficits. When the USD/PHP rate gets low people (and news papers/radio) start complaining. Gloria intentionally kept the peso weak against the USD. (here in PH the reserve and printing of money is only and directly accountable and managed by the president. Or so said the executive order signed by gloria that I read which created the philippine monetary reserve and where she also transferred the sum of government holdings to.)

 

It's that mentality of quantity over quality. If I have 20 pesos and can buy a chicken that isn't good. If I have 100000000 pesos and can buy only 1 chicken that's good because I have a lot of money. Maybe I can put it all in a wheel barrel and take my wheel barrel to the mall to buy some socks (or for a loaf of bread Weimar Republic style).

 

I'd expect to see the rate bounce back to 45+ and the prices for everything go up.

Edited by senseless
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CardiacKid

If you are an expat receiving your income in dollars and converting it to pesos, this is NOT good news. It is also NOT good news for international companies with operations in the Philippines because the cost of labor has just jumped. At some point, it is no longer worthwhile to have operations in the Philippines, and companies move their facilities elsewhere. Therefore, it is NOT good news for the Filipinos working for those companies nor the Philippine government, which depends on those companies to employ a significant percentage of the population.

 

An example of the damage that a strong peso does can be seen in the furniture industry in Cebu. Once flourishing, it is now on its last legs.The cut and sew industry has been largely put out of business due to lower labor costs in China and Viet Nam. Exports from the Philippines will now cost more than their counterparts from other countries. The cost of a vacation here will rise, and that will impact the tourism industry. Remittances from OFW's who are paid in dollars will now be smaller and that will hurt the government. I could go on but the end result is a lose-lose situation for a country that needs to export.

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I always have to laugh when I see a thread like this where everyone is pontificating on the future of the peso (or any other currency for that matter). Fact of the matter is no one has the faintest idea of what will happen. If you base your predictions on what you see in the news you will invariably be wrong because the government skews figures according to what they would like to see. At the beginning of the year the pundits were predicting high 40's or maybe even 50 pesos to the dollar by the end of the year. All it takes is some sort of political or economic bad news to send the peso into the dumper. I am told that currency speculation is the riskiest sort of investing. I believe that.

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My high school gfs father told us to go on to shoneys and eat ..he was too busy ...elated at making hundreds of thousands that day...when we got home his brains were all over the floor ..left a note saying he had lost the house savings and was deeply in debt ..in just 3 hours..deep tragedy for sure..she and the family moved to texas...one day theres a beautiful set in your hands and the next theyre 400 miles away... with no inkling of consideration for your sweet sensitive and loving nature...at least they left the cats..that we sold to the chinese restaurant...youre better off skiddin out on your scooter ..a cement truck squashing out your brain...on the way home with a case of macgoos...thinkin bout your girl and the kids waitin on you for dinner.. when you hit that final pothole its a lot simpler to sort out your stuff if its not all spread out all over the net... :P

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CardiacKid

Seems Headshot and I have company. The linked article is interesting reading about a strong peso.

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Seems Headshot and I have company. The linked article is interesting reading about a strong peso. http://www.malaya.co...2010/busi1.html :biggrin_01:

 

 

and good company you make. any economist worth his salt would tell you that an overvalued currency will hurt economic growth, particularly in developing countries. the japanese in the 1960s and 70s worked hard to support exports and curtail imports by intervening to keep the yen undervalued. china is now criticized for keeping the renminbi undervalued thereby supporting it's export-driven growth. countries that have intervened to protect a strong currency have generally suffered as a result. undervaluation is probably the most effective form of protectionism. any fluctuation in a currency will result in particular winners and losers, but undervaluation of a currency is usually associated with weak economies growing stronger.

of course, with the stronger peso, the price of milk has been coming down, and we all know that is a good thing. drink at least a liter a day myself...

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Headshot

Seems Headshot and I have company. The linked article is interesting reading about a strong peso. http://www.malaya.co...2010/busi1.html :biggrin_01:

 

 

and good company you make. any economist worth his salt would tell you that an overvalued currency will hurt economic growth, particularly in developing countries. the japanese in the 1960s and 70s worked hard to support exports and curtail imports by intervening to keep the yen undervalued. china is now criticized for keeping the renminbi undervalued thereby supporting it's export-driven growth. countries that have intervened to protect a strong currency have generally suffered as a result. undervaluation is probably the most effective form of protectionism. any fluctuation in a currency will result in particular winners and losers, but undervaluation of a currency is usually associated with weak economies growing stronger.

of course, with the stronger peso, the price of milk has been coming down, and we all know that is a good thing. drink at least a liter a day myself...

Yeah, it sounds counter-intuitive to say that a weak currency creates a strong economy, but it's true. Provided the currency isn't being weakened by a black-hole of a government that sucks down any benefits that come from the weak currency (like the US right now), a weak currency will tend to improve trade ratios and create employment. Cheaper products, materials and labor mean more business. If the peso isn't as strong (compared to other currencies), then you can make a lot more of them.

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