Saturday, October 28, 2006

On Philippine Currency and Economy

In my previous entries, I insisted a Peso exchange rate of 45 to 47 by end of November, and this prediction still stands. IMO, the Peso is still overvalued. Although most ASEAN currencies are overvalued relative to the US dollar (Note: recent [few months back] high interest rates by the Fed, and the humongous trade deficit of the US economy), still the Peso should led the pack, followed by the Rupiah, and the Bhat. I am sure the Central Bank would be in the market at the clamor of our exporters, but still it won't be able to control the Peso's ascent due to the 20 to 30% increase in remittances in November and December, pasko kasi. So? Expect a 45 to the dollar range or less by December 15.

Now this prediction, I have been trumpeting since the peso was at 56 early this year. Remember? Now let us say you have had 10K in dollars, the gain by now at 1:1, no leverage and excluding the interest rate would have been 10K x 6 = 60,000 pesos. And if it really goes down to 45, then you would have gained 110,000 pesos excluding interest, just by exchanging your dollars into pesoses last March. If you did, I would say that by March next year - convert your pesoses to dollar again, remember, May 2007 is our elections, and the economy would be flooded with election money, therefore higher than normal inflation, and weaker than normal currency. All I am saying is you can pocket the currency differential both ways, in similar manner that, if our elections goes smoothly i.e. less cheating and less chaotic, convert your dollars again to Pesoses by August until March 2008. Only if the GMA allies holds majority in Congress - if not, hold on your dollars, until the politics settle down and the path is clearer whatever that means.

This would be my strategy in the months ahead for my cents and dollars in my account, hehehe. Good Luck.

PS: on the news (PDI)

1. THE trade deficit narrowed significantly to $2.9 billion in the January-August period from $4.25 billion in the same months last year, with the deficit in August down at $621 million from $726 million a year earlier, the National Statistics Office (NSO) said Friday.

2. THE PESO Friday reached a new four-year high of 49.76 to the dollar before closing at 49.82, as upbeat investor sentiment drew more portfolio inflows, traders said.

3. PRIVATE borrowers have taken their cue from the central bank’s decision to prepay this year a total of $1.2 billion worth of foreign debts ahead of maturity to take advantage of the sharply appreciating peso, Governor Amando Tetangco Jr. of the Bangko Sentral ng Pilipinas (BSP) said Friday.

4. FOREIGN investors’ purchases of Philippine stocks rose sharply in the January-September period, helped largely by improved sentiments in view of government efforts to reduce the budget deficit, the Philippine Stock Exchange (PSE) said Friday.

5. Stock market is in highest since the Asean Crisis.


So? let us wish this all continues. However my prediction is, by January until May - dirty linens would be washed in public resulting in all sorts of manner to halt our countries economic momemtum led by the pack of self serving politicians. Who cares about the poor? about the economy? anyone?