Peso strengthens further to 46.31:$1

‘Stocks are strong, so are remittance flows’

http://business.inquirer.net/money/topstor...rticle_id=67243

By Doris Dumlao
Inquirer
Last updated 01:05am (Mla time) 05/22/2007


The peso rallied Monday to 46.31 to the dollar, its strongest in six-and-a-half years, rising with other Asian currencies after China widened the yuan’s trading band against the dollar and lifted interest rates.

Shrugging off a report from credit rating agency Standard & Poor’s, the peso gained by another P0.29 on the dollar from Friday’s finish of 46.60 to close at its intra-day high, the highest since the peso touched 46.30 to the dollar on Oct. 6, 2000.

S&P maintained the Philippines’ sovereign credit rating at a few notches below investment grade, citing lingering concerns over the country’s fiscal stability.

Trading was brisk on the spot foreign exchange market Philippine Dealing System, with the volume reaching $971.85 million.

The Philippines was reported to be attracting some “yen carry trade” portfolio inflows on top of strong seasonal cash remittances from overseas Filipino workers, said Jonathan Ravelas, Banco de Oro Universal Bank’s chief strategist.

“Yen carry trade” refers to the practice of borrowing money in Japan, where interest rates are very low, and investing the proceeds in higher-yielding emerging markets such as the Philippines.

The disappointing report from S&P as yet has not affected currency trading, Ravelas said.

One trader said, “There are lots of flows from foreign funds coming into the market... Stocks are strong, and so are remittance flows.”

Also, investors are waiting for the May fiscal report, Ravelas said.

After a disappointing first quarter, the government reported an April budget surplus of P12 billion.

A trader said the central bank might have bought dollars to curb the peso’s rise, but if it did, the intervention was not heavy.

On Monday, the government announced a “policy of non-intervention” in the currency market.

Trade and Industry Secretary Peter Favila said the administration of President Gloria Macapagal-Arroyo would not intervene to halt the peso’s growing strength.

“It is a declared policy of government [that] there will be no intervention in the market,” he said. “Let the market forces take their course.”

Across the Asia-Pacific region, currency gains were solid.

Demand for high-yielding currencies such as the Indonesian rupiah was boosted by a rally in Asian stocks, which reacted calmly to Friday’s decision by China to raise its benchmark interest rates and bank reserve requirements.

Expectations for a pick up in yuan gains tend to benefit Asian currencies.

The yuan, now permitted to rise or fall by 0.5 percent each day versus the dollar, compared with the previous limit of 0.3 percent, rose as high as 7.6615, its highest level since a dollar peg was abandoned in July 2005.

The Malaysian ringgit rose to 3.3905 per dollar, its highest in just over nine years, making a decisive push through the 3.4 level that had proved a tough chart barrier for more than a week.

“The initial reaction to the China news is positive and the obvious focus is on the ringgit, because China and Malaysia depegged their currencies from the dollar at the same time,” said Callum Henderson, head of currency strategy at Standard Chartered. With reports from Michael Lim Ubac and Reuters; with INQUIRER.net



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IMO it's not really strengthening if it's just the dollar that's performing poorly. lol.

the brazilian Real went under R$2 per $1USD for the first time in a very long while, and the loonie is sitting at $1.0958 per $1USD... ($1cdn is $0.89usd) but when you compare em to the euro, it's pretty much the same.

or is the peso gaining against everyone?

agreed.

the US purposely weakens their own currency, as what i heard

To lift exports and slow imports. They believe it makes U.S. exports less expensive and that higher demand will cut the huge and growing US trade deficit. Much of the trade gap relates to US commerce with East Asian countries such as China, Japan, and Korea, who sell much more to America than they buy.

Power is slowly shifting once again to ASIA and we are living it as we speak.

and by "ASIA" do you mean "CHINA"? lol sorry coz everytime people say "asian" it's usually one of the three: china, japan, korea.. and most of the time it's China. lol anyway, sorry OT

but still, it's good that the PH Peso is "getting stronger" against the dollar

i think it's going down to 45 against a dollar

talo naman ang mga ofw nito lols.. di naman bumababa ang mga bilihin

ZzzzzZZZzz. Whatever. Wake me up when it's like 10:1. Only then will I celebrate.

can you make your sig smaller please? the ideal size is under 150 pixel height. yours takes up too much of the page.

they say by the end of the year, it will hit 42 or 43. GDP growth might reach 8%!!! wow! it'll be a matter of time now before we are rich again like in the 50s, 60s and 70s

uhm GDP growth of Philippines in the first quarter is about 5.5%, to get GDP rate growth to reach 8%, the three final quarters have to be above 9%..

I remember before the Asian crisis, peso was at 27 against the dollar. When it went to 23, everybody panicked. This trend just became obsolete when the Asian crisis came and caused the peso to depreciate to 28-29.

I don't think exchange rate affects the economy of a country that much. Going by that logic, most Chinese should be poor because their currency is ridiculously devaluated.

I think purchasing power parity should be a better gauge.

how about that would that be fine?

yea, that hould be fine for now. but the next time you make a sig just keep in mind that it has to be much smaller than that. it's distracting lol.

but thanks for changing it. ^__^

anyways, yea it used to be 1 CAD:25 PHP... now it's like 1 to 50. what the hell?

I said it MIGHT reach 8% because that's what they are trying to get. It's like in Shanghai a few years back where they had 8% growth and now, it's 13%. WOW!

I said it MIGHT reach 8% because that's what they are trying to get. It's like in Shanghai a few years back where they had 8% growth and now, it's 13%. WOW!

I said it MIGHT reach 8% because that's what they are trying to get. It's like in Shanghai a few years back where they had 8% growth and now, it's 13%. WOW!

If US is intentionally weakening US $, it might be copying China where they kept they currency really weak.

was the philippines really rich in the 50s 60s and 70s???

^^^Yes. We were the 2nd richest in all of ASIA, just after Japan. Heck, we were the most advanced country in the region, economically, militarily, socially, politically, and all the other lys...We were able to send troops to the Korean War, Vietnam War and some war in Africa...we were scientifically advanced...we were a pioneer in the Green Revolution...etc etc etcBut then, Martial Law came...and you know the rest

Yeh I don't know why Filipinos want the peso strengthened. The Japanese yen is like 100:1 against the dollar. They keep it low on purpose. China does the same. I saw in the business report that a weaker dollar means less investments in Philippines.

Although I would love being able to buy lots of dollars with fewer pesos because I live in Philippines, I don't think its good for the country.

well if they have a weak currency...it means they have less FOREIGN investments...since Japan, US and China are self-dependend and developed, they do not need anymore foreign investments...as for us, we NEED the foreign investments since we are still developing...

no problem.

LOL

No... Lets pretend that I'm an American Investor. I want to invest in Philippines, but because my Dollar is weakened and the Peso is stronger...then I can not invest as much, because I don't have as much money.

Also to say that China is completely developed and does not need investments would be wrong. China is still desperate for investments. In fact, even the United States is desperate for forgien investments. Countries do what ever they can so they can get money. To say that China, Japan and America lowers their currency on purpose because they no longer need investments isn't logical.

then what's the purpose of the US Dollars purposely lowerng its currency?

I read somwhere that it would be cheaper to manufacture things with a lower currency. This way they can equal things out with Japan and China who have extrememly low currencies and are also America's number one trading partner.

^thanks bro...
then maybe we should start to lower our currency...

How can China has a low currency when One U.S. Dollar is only 7 Chinese Yuan? Japan ($1.00=121.25 Japanese Yen) and Korea (US$ 1.00=998 Korean Won) has low currencies compare to China. The United States has been asking China to devalue their Yuan (lower the exchange rate US$ 1.00 = to about 20? Chinese Yuan). The United States has been buying China's products, but China is reluctant of buying US products. Kaya ayun yung international reserve the China ballooned to over one trillion dollars.

Kung maghihigpit ang United States sa mga produkto galing China, then I'm sure maraming workers sa China ang mawawalan ng trabaho, at mga mabibili sa Wal*Mart ay hindi na galing sa China. (During the 90s, Wal*Mart's slogan "Proudly American Made" but now "Made in China")

The Philippine Peso is now 46 to a dollar, does this mean that all the things you buy also went down? When I was still in the Philippines, a hamburger costs only 10 pesos, (exchange rate at that time was US$1.00=20 Pesos). How much is a hamburger now?

Right now, there's a promo where a you buy a simple hamburger for Php 25.00 and you get one free. So that makes it Php 12.50 / hamburger. Also, I've seen some that costs Php 15.00, Php 17.00, Php 20.00 and those in Jolibee, Php 25.00.

Explain ko nga sa inyo guys para malinawan tayo lahat.

We also have to consider the purchasing power of the currency. The fluctuation of currency doesn't directly affect its purchasing power.

Let's consider this. I'll use a common currency so that we can visualize things further.

All of these are just examples (although a good estimate)
Minimum wage in the US: $40 a day
Minimum wage in the Philippines: $7 a day
Minimum wage in China: $2 a day (Yup. Philippines has a higher minimum wage than China, and most of South East Asian countries actually).


Purchasing power is defined by how much a person earns in relation to what he can buy
Cost of Big Mac in the US = $6????
Cost of Big Mac in the Philippines = $2
Cost of Big Mac in China = $0.50?????

Which currency has the best purchasing power? It's the US dollar. You can buy almost 7 big macs with the minimum wage.
Which currency has the least purchasing power? It's the Peso. You can hardly buy 4 Big Macs with it.

Now, how does trade deficit work?

If I were a Chinese businessman, and I decided to sell Big Macs in the US, what would happen?
It will kill US businesses. No one would buy a $6 Big Mac when someone offers it for 50 cents. Even if the Chinese guy increases the markup of his Big Mac a couple of times, it's still cheaper than the US Big Mac.

Also, this explains why foreign investors love to invest in China. A lot of its citizens are satisfied with their $2 a day salary since their Big Macs there are cheap anyway.

The problem is, if a businessman from the US decided to sell American Big Macs In China, would Chinese people buy them? Nope. No one would dare buy a burger that's three times the minimum wage.

And that explains trade deficit. Chinese products are selling like hotcakes in other countries, but US products can hardly go out.

^^^ and yeah sometimes it makes me wonder if that is the reason why the us has always been "troubled" by china
agrees..
actually sometimes i feel that the government is somewhat "over reacting" when they guage the economy because the peso "strengthens"...

by the way i would recommend the book peso exchange:why are we so poor by rey angeles..
it somewhat gives a view on how exchange rates work...somehow...

Thanks for simplifying things.

How does this trouble our exports? It hurts my head

Our exporters sell their products at foreign currency.

For example, let's say we sell our pineapples to the US at $1 a piece.

US will give us $1.

Before, when the peso was weak, we get 56 pesos per pineapple that we well. Now we get 46. We'll get hurt if we're in the position of an exporter.

^^^thanks. its all clear now

So this is why I dno't understand why all the people are cheering because the peso is stronger,

ROFL, because it use to be $1:₱1

Interesting.

But a stronger peso, means more value for Filipino money. Strengthening currency and low inflation, that will help cut down the poverty level in the Philippines. Not to mention more consumer spending would be good for the economy.

There are of course pros and cons of every situation especially in the ever complex world of global economics.

i really do not believe a stronger peso means a higher purchasing power...
i mean look at the current situation...basic needs or as they say as the consumer basket cannot even filled by people just above the poverty line...even the poverty line seems to be blurred...:P
besides..i might don't know much about the type of what are government want us to have...
more foreign investments?..or encouraging local entrepreneurs???....
because what i notice is that their priority is the first not the second...
i still believe on the second though..filipinos are full of potentials...i believe...

you retards!!! you are not giving to who the credit should be given!!




thanks madam president!!!! youre the best!!!
i dont care what the opposition says.. i dont
care what the commies says... you are the most
underrated president of all time....
keep up the good work!!!nice(borat accent)!!!

^^^umm...thanks dad, and all the other OFWs out there.
GMA had the plans and the OFWs did the hard work. So both of them are to be thanked.

decrease the size of your sig.

Ive never seen $1=Php45 in a very long time!

I havent seen $1=Php45 in a very long time!

^^hopefully we'll see one soon

I hate to admit, but even though the peso is at the 45 range, I cant feel the effects... gasoline even increased in the past days! now im just riding the MRT to work!

Blame Shell, Petron, Caltex for manipulating their oil prices. Also, blame Bush for his Iraqi "Liberation" War which increased oil prices. The 45 range actually played a great role in making oil prices stable for the past few months.

^^^ that is why it pisses me if the commies blame the government for these...