Just this afternoon during my regular meeting with the management team of my company, I was reading the newspaper to see what new developments that the country has been achieving, in the business aspect of course. While the usual crisis as far as unemployment and companies merging or declaring bankruptcy one after the another was still in the top of the heap of news, I noticed that the dollar to peso exchange rate was below the Php 50.00 = $1.00 for the first time after a long time. It currently stands at Php 43.88=$1.00, a far cry from the recent years where is rarely went below Php 50.00=$1.00. Then it hit me that it was just exactly about a year ago when the peso was slowly improving, it took almost a year for it to break through the Php50.00 barrier, something that most deem as a good sign as far as the economic development of the Philippines is concerned. A lot of this can be attributed to the fact that the fast growing number of overseas workers, particularly nurses and specialized professions, has been remitting their earnings mostly in the form of dollars or other foreign currencies.
The same can be said for other Asian economies where their currency has improved against the USD, even major ones like Japan. In a time when everyone is worrying about a double dip recession in the US and Europe, and even a slowdown in China- Asia may by default benefit as a perceived safe haven. So while a strong Japanese yen vs. the USD may hurt the export industries like Toyota, Sony or Ajinomoto– the repatriation of funds should more than balance this out and in fact lead to great internal investment.
If my presumptions hold true and the trends do not falter, it can still improve, considering that the holiday season has not yet even been started and this is a good sign for the Filipino people, particularly for trading companies such as the one I am handling right now. Merlion International Sales, Inc., thrives in the exchange rate , owing to the fact that most of the goods are manufactured and produced in Taiwan, a country that has a higher cost of labor and production costs compared to the local manufacturing in the Philippines.
On one side, I still wonder if this is really a good sign, or it is just that other countries are now catching up towards the jumpstart practice as far as economic management is concerned. If there is one thing that most people should consider before celebrating, it is the reaction of other currencies with regards to the Philippine Peso. If there is no significant change, I am sorry to break it to them, but maybe there is something we are not looking at. The dollar has become the focal point for comparison, but it should be noted that other currencies also have something to do with the entire flow of the economy for local and foreign counterparts.
Links and References:
- Factors Influencing a Currency Pair Exchange Rate
- A Currency Exchange Rate-driven vs. Strategy-driven Analysis of Global Sourcing
- Floating and Fixed Exchanged Rates
Originally posted on October 26, 2011 @ 7:29 am
