The Philippine Peso, PHP, exchange rate vs. the US Dollar. It’s a topic of great interest among American expats living in the Philippines as any fluctuation in the rate directly impacts our finances. A weaker peso means more money in our pockets. The recent drop in the PHP, which weakened to 44 to 1 at one point, was doubtless cheered by my kano friends all across this archipelago. If the rate holds to around 43 to 1, it means several thousand pesos extra for us from last month when we do our upcoming exchange.
What’s driving the recent Philippine Peso vs. US Dollar activity? Analysts say investors are dumping risky assets amid speculations the United States may withdraw its stimulus measures as the world’s largest economy shows signs of recovery. American consumer confidence rose to a five-year high of 76.2 in May.
Contrary to the Bank of America prediction last year that the Philippine peso could hit 30 plus-level this year, the exchange rate versus US Dollar continued to weaken at the 43-to-$1 level in June. Above 43-mark is said to be the weakest since June 26, 2012 when it hit 42.47. (source: The Summit Express)
The expensive valuation of the local stock market was likewise cited as another key factor behind the sell down. The Philippine Stock Exchange Index tumbled to 5,789.06 last Tuesday, the lowest close since December 19, before bouncing back in a technical rally on Wednesday and Thursday. The index on Tuesday had lost 22 percent from a record 7,392.20 set on May 15, wiping about $62 billion in value from the stocks.
Stratbase Research Institute, a private think tank, noted that the plunge of Philippine stocks and the peso amid the uncertainty in the global economy highlighted the need for the Philippines to attract job-generating foreign direct investments to achieve inclusive economic growth.
Stratbase president Victor Andres Manhit said the best protection for stock investments was solid economic growth, fueled by job-generating investments, which the Philippines lacked. He cited that foreign direct investments in Philippines was the smallest in Southeast Asia, depriving millions of jobless Filipinos of employment opportunities.
Unemployment rate in the Philippines climbed to a two-year high of 7.5 percent in April 2013, as three million Filipinos of working age had no jobs while another 7.25 million considered themselves underemployed.
Manhit added the robust 7.8-percent economic growth in the first quarter was driven by remittances and consumer spending, and not by investments and manufacturing. (Source: Manila Standard Today.com)
The Philippine Stock Exchange is now one of the the worst performers among Asian markets, on poor exports and jobs figures.
The weakening Philippine peso is good news for those who have remittances in the Philippines as their money will be valued more. Its also beneficial to the export side.
Here’s another prediction regarding the Philippine Peso vs. the US Dollar made at the end of last year: Merrill Lynch of BoFa said that we could expect an average of 41 to dollar by the first quarter of 2013 and strong forecast of 39.80 appreciation for the rest of the year.
BofA’s forecasts were stronger than the government’s official assumption of 42-45 for 2013.
On July 4, 2012, I posted “US Dollar to Philippine Peso Exchange Update: Peso Hits 4-Yr High.” The rate then was 1 USD to 41.68 PHP but as many American expats living in the Philippines know, things got even worse in January 2013. The peso surged below 41 against the US dollar, closing at P40.77, on the first business day of the 2013 New Year. This rate was a five-year high at the time and represented a gain of P15.55, or 27.62 percent, from the 2005 low when a dollar fetched P56.32. (Source: Inquirer Business)
Some like to speculate on where the Philippine Peso vs. US Dollar exchange rate will go. But that’s all it is, speculation. Not even all the financial experts can agree. I have seen highs of 45 PHP to the dollar by year’s end and lows of 37 to 1 predicted.
One bit of advice. Get your financial house in order before you decide to move to the Philippines. If you have to, wait until you have a good, steady source of guaranteed monthly income before you arrive. Of course, all of us want more money in our pockets, but if you get too obsessed about the Philippine Peso vs. US Dollar exchange rate, you’ll drive yourself crazy. And some of us, like myself, are already there.