Below is the 10 year chart of the Philippine Peso against the US Dollar. In the trading world, all currencies are pegged against the dollar because it is considered to be the strongest currency in the world. Hence, when trading currencies, the basis always is the mighty USD.
So what does the chart below tells us?
If you notice, the trend is upwards. Meaning, depreciation of the Philippine Peso.
History shows that on 2013, it tried to break the 45/dollar mark. And almost touched the P49/dollar mark at the end of 2015.
There are so many reasons why the market moves, but normally, correction happens at the last quarter of the year. Traders are dumping their stocks/currencies valued in Philippine Peso in exchange of the US Dollar. Why, for profit, of course.
You bought the Philippine Peso earlier in the year at a lower price. So you sell it off at a higher price. A few weeks ago, I bought US Dollars at P46.50 and P46.80. Now, the price of the dollar is P48.20 . If I sell today, I would be earning P1.70 pesos per One US Dollar. Imagine if you are trading in millions. How much would you earn now?
See that’s just how the market works. It is after all, buying and selling of currencies. You buy when it’s cheap. And you sell when you know you are going to make money out of it.
That is what’s happening now. A year end correction. The investors are on a wait and see attitude until January 2017.
The news is making us believe that the Philippine Peso being at P48.00 against the US Dollar is bad. I would say, NO. That is not always the case. Let me explain why I say so.
One, our overseas workers, are happier this way. If they send $1,000.00 to the Philippines, it will now be valued at P48,200.00 which is way better than P46,000.00 in the past few months. This then means that come Christmas, money spending will be higher. The ordinary Filipinos will be able to celebrate more because now they can afford to. The local economy will be bustling with all the shopping going on.
Second, on a larger scale, our exporters will be happier as well. If you are an exporter of let’s say cocoa or banana and you are paid in US Dollars, imagine the difference on your income. For instance, even with 1 ton of local produce costing $10,000.00 – your P460,000.00 has just risen to P480,200.00 . See that isn’t bad right? Ask your exporter friends about this and tell me if they aren’t jumping for joy. 🙂
Third, we are looking for investors. That’s a fact. The Philippines need jobs. Hence, investors are a must. If I am an investor, tell me why would I spend my money on the Philippines when there are other Asian nations like China, Vietnam and Thailand? So, the bottom line is, a cheaper peso plus english speaking Filipino employees, is a win-win situation for us. If the investors monies will go a long way in a country, that’s where the investors go. It’s business my friends. Cheaper peso means better chances of getting international investors.
So no, let us not be afraid of what’s going on in the currency/stock trading world now. The correction is bound to happen. And it will bring us more good than harm.
To our importer friends, just hold on. You have been enjoying a cheaper US Dollar for quite sometime already. So let us be happy for our exporters for a few months. I just hope that you paid your US dollar debts already because if not, then that means more Philippine Pesos out of your pocket these days.
There’s a lot of resistance on the P49/dollar level. So it may have a difficult time breaking that. If it does, then we will be looking at the 2007 high of P50 per us dollar.
Honestly, I don’t like that because when I go to the US, my shopping money has lesser value there.
But you know, the world doesn’t revolve around me. 🙂 So that’s fine.
What’s important is that our OFW’s and Exporters are happy. Plus when the peace and order is better, Investors will come by the volumes.
I learned all these things when I worked as a Licensed Currency Trader. So yes, I know what I am talking about.
To all my Realtor friends, this means more investments from our OFW’s. I am excited!
And to our overseas workers and everyone earning in US dollar, enjoy! 🙂