Strong Peso: what to do with it?
A friend asked me about my position about the "strong" exchange rate. Because it's not translated in reduction in petroleum products or other commodities, and it's hurting both the OFWs and exporters.
My take on this is that there ain't much you can do about the strengthening peso. Its the old supply-demand dynamics.
Supply of $ to the country is faster than demand, as more OFWs remit their incomes back home, more portfolio investments inflow, and more foreign tourists coming too, perhaps.
Demand for $ lower than supply. One recent development is the weakening of US$ as the US government keeps piling up its public debt, due to perennial and endless budget deficit every year. In 2006 for instance, deficit was around $450 B. Many investors around the world are slowly dumping the US$ for the Euro, or chinese renminbi, or other currencies by emerging markets.
So, what to do with the strengthening peso? Nothing!
Perhaps if the exchange rate will fall from the current P47/$ to only P40/$, then there will be less outflow of Filipino nurses, doctors, managers, domestic helpers, etc. And people who cry "brain drain" whenever planes upon planes of Filipinos leave the country will probably sing "alleluiah".
About petroleum products prices, why they don't come down despite the strengthening of the peso -- the instabilities around the world keep petrol prices high. Venezuela nationalized all petroleum companies; hence, you dont know what Hugo Chavez will do next with his country's big petroleum deposits and supply. Then the US parading its battleships and aircraft carriers near Iran, and you have some talks that it may attack Iran to delay its nuke weapons program. Then Russia announcing that it may attack some European countries with missiles if the US' anti-missile shields are posted there.
Every instability translates to nervousness and sometimes irrational stocking up of petrol products, that drives prices up.
My take on this is that there ain't much you can do about the strengthening peso. Its the old supply-demand dynamics.
Supply of $ to the country is faster than demand, as more OFWs remit their incomes back home, more portfolio investments inflow, and more foreign tourists coming too, perhaps.
Demand for $ lower than supply. One recent development is the weakening of US$ as the US government keeps piling up its public debt, due to perennial and endless budget deficit every year. In 2006 for instance, deficit was around $450 B. Many investors around the world are slowly dumping the US$ for the Euro, or chinese renminbi, or other currencies by emerging markets.
So, what to do with the strengthening peso? Nothing!
Perhaps if the exchange rate will fall from the current P47/$ to only P40/$, then there will be less outflow of Filipino nurses, doctors, managers, domestic helpers, etc. And people who cry "brain drain" whenever planes upon planes of Filipinos leave the country will probably sing "alleluiah".
About petroleum products prices, why they don't come down despite the strengthening of the peso -- the instabilities around the world keep petrol prices high. Venezuela nationalized all petroleum companies; hence, you dont know what Hugo Chavez will do next with his country's big petroleum deposits and supply. Then the US parading its battleships and aircraft carriers near Iran, and you have some talks that it may attack Iran to delay its nuke weapons program. Then Russia announcing that it may attack some European countries with missiles if the US' anti-missile shields are posted there.
Every instability translates to nervousness and sometimes irrational stocking up of petrol products, that drives prices up.
posted by Bienvenido Oplas Jr | 1:53 AM
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