I recently received an email about a proposal to stop remitting dollars to the Philippines on November 1 to 5(not sure). The intent is to see if the Peso would drop in value with respect to the dollar during that period. And maybe eventually force the hand of the government to devalue the Peso.
Here is my take on this issue:
The Peso is going up because the Dollar is actually going down. The dollar is weakening. All the world's currencies are going strong with respect to the dollar, it is not only confined to the Peso.
The OFW remittances are strengthening the Peso. Even though we will stop sending money for a few days, we still have to send it again some other time. This continued inflow of dollars into our country is propping up the Peso.
Devaluing the Peso could cause lead to more volatility in our currency because forex trader could come in and bring the currency back to parity. It just like the time when George Soros almost broke the Bank of England because the UK was artificially holding up the Pound when it should have been lower in value. It was done before, there is no stopping traders from doing it now on the Peso.
My suggested course of action for this situation is to sit it out. Don't stop sending money. Do not let your relatives in the Philippines suffer from late remittances. Just let the market play it out. My theory is when the United States starts to pull out from Iraq, that is the time when the dollar will start rising again.
Saturday, October 27, 2007 |
Posted by
Flea Market Trader
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4 comments:
good point!
wow a fellow pinoy forex trader!!! i will link your blog to my blog...
how you also visit my blog
http://traderpinoy.blogspot.com
soros did break the bank of england hehe.
if theres a way around the OFW's dillema on the exchange rate, it is probably by sending goods rather than cash to family back home. send food, clothes, shampoo clothes or whatever neccesary commodities if its cheaper abroad plus the cost of shipping. Cash could be limited to as little as possible for things like tuition fees, travel, housing. etc. you probably get the idea. cash savings dont even need to be sent back home. it could be used to purchase stocks or deposited abroad. probably hard to do, but it the only way to hedge against the low exchange rates
The Overseas Filippino workers (OFWs) would continue to remit money back home because most of these OFWs are single earning members of their families. But the volume of remittances would surely go down with time as the inflation surges ahead. In view of these problems, the remitters would look at acquiring assets. But with the prices of essential goods shooting high, the economy is going to face some tough times ahead. I am dealing with these issues on my blog- http://onlineremit.blogspot.com/
Do visit and let me know what your opinion is
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