The Losing Power of the Pinoy Peso-- Again!

[jpdm]

Since the early part of the year, the country experienced the resurgence of the value of the peso...in fact it was one of the major "accomplishments" of PGMA...


But recently, the peso is losing its value again vis-a-vis with other currencies especially with the US dollar.



The last time the value of the Philippine peso slipped big time was after the Asian Financial Crisis (1998).


What are the reasons why the peso is losing its value again?



History will tell us, that the depreciation of the peso triggered a slowdown in our economy in 1998. Will it again result to a recession in the philippines today and the next few years?

[uls]

the appreciation of the peso was caused by the falling US dollar

it had nothing to do with any "accomplishment" by PGMA

Now that there's great demand for the USD again, the peso is falling

why is there demand for the USD?

Investors are getting out of global markets and are going back home.

Foreign funds are net sellers in the Phil. stock exchange.

They sold their holdings, convert their pesos to dollars and are fleeing to the safety of cash and US T bills.

That's why lumakas ang demand for USD. (ang humina ang peso)

--

the world is falling into recession

and the Phils. is not immune to it.

[Monseratto]

The peso is not the only currency that's going down. We are entering a global recession. Pray it doesn't last long...

Dollar rises sharply against euro, pound

BERLIN (AP) -- The euro slipped below $1.28 for the first time in nearly two years on Wednesday, driven lower on speculation that central banks in Europe are likely to lower their interest rates as fears of a global recession grow stronger.

The 15-nation euro dipped as low as $1.2736 in morning trading before rising slightly to $1.2873, down from $1.3003 late Tuesday in New York.

The dollar began making strong gains against the euro and other benchmark currencies on Tuesday after Bank of England Governor Mervyn King announced that a recession in Britain was imminent, and that new government action was needed "promptly."

James Hughes of CMC Markets in London said investors were flocking to the dollar amid speculation that central banks would aggressively cut rates to try to stimulate growth.

"As a result we have seen some spectacular declines by some major currencies against the dollar in the last 24 hours with traders seeking to bail out of positions as fast as possible," he said.

Many investors are moving away from stocks and commodities, buying into US dollar, Japanese Yen and US treasuries...

Deleveraging continues as funds flow away from stocks, commodities, and carry trades into the US dollar, Japanese yen, and Treasuries. Indeed, the US dollar has rocketed versus most of the majors, but the Japanese yen has proven to be even stronger as the low-yielder has surged nearly 5 percent against the greenback and over 10 percent versus high-yielders like the New Zealand dollar and Australian dollar. Why? Risk aversion remains high as UK GDP figures signaled recession while OPEC cut production by 1.5 million barrels. This has also triggered massive losses for European stock markets.

[tidus1203]

And for me the way I value a currency is not its FX rate but rather its purchasing power and inflation. Even during the days where the PHP was gaining against the USD the purchasing power of our money was sliding and now we have double digit inflation. The PESO was never strong, never was.

In fact right now IMO the Euro is still stronger than the Dollar. Yes the Dollar is gaining against the Euro but that is just money flows. Europe still has a lower inflation than the US. So the Euro has a better characteristics of maintaining its purchasing power.

[niky]

Yeah... it sucks.

There was some hope, locally, that investors opting out of Wall Street would instead go bargain hunting and would start buying stocks both here in the Philippines and around Asia. Instead, as the others are saying... they're pulling out their money EVERYWHERE.

Utsa talaga tong stock market na ito... people acting like rats leaving a sinking ship (the global economy being the ship in question).

Opportunities lost.

The movement of the peso, as said, was nothing more than numbers on paper. I remember we were talking about it and pointing out that it was actually the dollar falling compared to asian currency in general. The appreciation wasn't even enough to offset inflation or increase the buying power of the people... it even made things harder for exporters, who couldn't keep their prices competitive with the "strong peso"... all it did was make it easier for the government to pay off its own debt.

Oh well... at least we still have our OFWs. And Filipinos are still in big demand in the Middle East... which is one of the few places in the world where new workers are still in demand.

[Gen. Miting]

Since the early part of the year, the country experienced the resurgence of the value of the peso...in fact it was one of the major "accomplishments" of PGMA...


But recently, the peso is losing its value again vis-a-vis with other currencies especially with the US dollar.



The last time the value of the Philippine peso slipped big time was after the Asian Financial Crisis (1998).


What are the reasons why the peso is losing its value again?



History will tell us, that the depreciation of the peso triggered a slowdown in our economy in 1998. Will it again result to a recession in the philippines today and the next few years?

highly doubt it. from a different standpoint, nakasama nga lalo yun pag-appreciate ng peso kasi lalo nagmahal ang bilihin probably bec. business is expecting higher standard of living from peso earners.

now that global recession is here and peso has less value to purchase or to buy, businesses have no choice but to lower down their prices sooner or later. it wont happen this year as we are approaching X'mas season

in the minds of businessmen, devalued peso is money pa din. daanin na lang sa quantity.

----

as case in point, look at jollibee, wendy's, kfc, they each have 39'ers, 49, and 55 budget meals. tignan mo ang pila nito kada lunch or dinner time sa malls. imagine jollibee's 39'er walang pang $1 meal.

[uls]

A reason why the market is acting irrational is coz there is forced selling going on.

Highly leveraged hedge funds are facing massive withdrawals.

They had to get out of their their positions... they are selling everything.

Another reason is that panic has overwhelmed the market.

The concern now is safety.

What matters now is not return ON capital.

What matters is return OF capital.

Who cares if almost zero ang returns... Just don't wipe out the principal.

Now it's about preserving capital.

Cash and T-bills.

---

the Fed is gonna cut rates again...

the market is expecting a 50 bps cut, maybe even 75 bps.

from 5.25% last year, to this year's 2% then to down 1.5% currently...

and then if the Fed cuts again... 1% or .75% nalang ang Fed funds rate.

and people are buying dollars... amazing.

---

The Bangko Sentral sold dollars today to support the weakening peso.

[Eismann]

The strong dollar we have now is due to the us bail out on financial institutions, uncle sam is flexing it's muscle to keep their economy from sliding into "real" recession(if not yet) which would eventually affect the world economy if left unchecked.

And peso like other asian currencies will natuarally go down in value as dollar gains. Like Niky said, good for us we have millions of OFW earning dollars for us.

Euro would have fallen hard too, if not for the prompt bail out duplicated by their governments. As it is right now, USD is still king of currencies. And people hold on to them bad, stock market confidence is dwindling by the day.

[tidus1203]

Nah, the Yen is the king of all currencies even the USD is getting killed against the Yen. The Euro and Sterling went to hell against the Yen. And the Australian Dollar/New Zealand Dollar against the Yen, well, it went to Oblivion

[uls]

US/JPY 93.936 as i'm typing this

Ya the yen is very strong

Now that the world is crashing, investors are fleeing to the currencies of the 2 biggest economies in the world... the USD and JPY

Tidus, your worst fear --- another dreaded Fed rate cut is approaching...