With a market determined exchange rate, we cannot rule out an appreciation of the peso in the future. The problem with a depreciating peso is that while our exports become price competitive in world markets, our imports of raw materials and capital equipment become more expensive. Since most of our exports of garments and semi-conductors are import-intensive, we don't benefit much from a peso depreciation. Even if OFW remittances buy more goods in the Philippines because of depreciation, this is matched by rising pricing as a result of higher import prices.

The Malaysia and China experiences show that we can have a stable exchange rate system but at the cost of our international reserves, which the Philippines does not have much. Malaysia and China can easily defend their currencies because they can buy or sell dollars using their huge foreign exchange reserves. We don't have that luxury. You only need to go back to our experience in 1997 during the Asian financial crisis. Because the Philippines could no longer defend the peso (which was under a managed exchanged rate system - in between fixed and market-determined system) brought about by speculation, the Philippines abandoned defense of the currency and allowed the market to determine the level. If we only have huge amounts of foreign exchange, maganda talaga ang fixed exchange rate because it promote certainty in pricing of foreign exchange, among others.