This is a reaction to Doris Dumlao’s Article regarding the statement given by BSP Deputy Governor Diwa Guinigundo regarding his statement that “A stronger peso affects OFW households that receive remittances denominated in US dollars, but OFW’s in the Middle East and Asia are benefiting from the strengthening of the currencies in their host countries.”

This statement given is totally paradoxical to what is the present situation of the OFW’S in the middle east. Though the peso strengthens, still the prices of the local commodity in the Philippines is not changing. Price of oil still is sky rocketing in the market. Likewise the dollar rate is depreciating. Thus, the OFW’s are forced to increase their remittances to meet the peso equivalent of their previous remittances which has been depreciated by the increasing power of the Peso. It has been seen and noted at at least each OFW in the middle east is losing at least P 12, 000 to 15,000 from the dollar depreciation. Likewise, the Saudi riyal (GCC) is pegged with the dollar rate, so the salary of the OFW’s in the middle east, once converted to either dollar or peso still still depreciated.

In line with these, there are several questions that the OFW’s in the Middle east would like to address to Mr. Guinigundo.

1. How and where did the BSP Governor obtained his theory regarding the status of the OFW’s in the Middle east?
2. How sure is he, that the OFW’s and their family are benefiting from the depreciation of the Dollar rate in ratio to the Rising Peso?
3. How sure is this fact that the Rising peso would guarantee that the Filipino community would benefit from this? Will the prices of the local commodities depreciate also?

To this, there had been a number of cases that OFW’s are forced to leave their current job and go back home, since the difference between their salary and income being generated in the Philippines are just the same, as some ex-saudi stated. Hopefully, these “Bagong Bayani” in the Middle east and Asian countries , whose sacrifices and efforts would not be in vain, since they are the least recognized individuals in all sectors. With the social stigma that OFW’s in the US who are also immigrants, are the one’s whom they claim to be the Bayani’s of the Country…FYI….

Unfortunately, most of big economies in the middle eat is pegged to the $ (and it’s fixed) - that is why we are very much affected by the weak dollar. OFWs need more $$$ to send the same amount of peso. So in effect, they are sending more $$$.

Although personally, I tend not to send money for unneccessary expenses. I am holding on to my $. Forex is unpredictable. I remember during the gulf war, the peso dived into unimaginable levels. Then came the Asian Crisis in 1997. Election is less than three years away and a lot can happen before after the next Presidential Election.

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to profit with strenghtening of peso, why not borrow more dollars and payback dollars at its lowest rate. profit is difference in exchange rate. in stock market, it is called short selling.

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@ nina - USD is falling against other currencies, not just php. You may want to reconsider your move to hold your $. as usual, caveat emptor.

trust me…the last thing you want now is a weak peso… OIL will soon hit 100$ a barrel….

those OFW’s wishing for a weak peso… (Im an OFW as well)… better check your senses…. Philippines is a NET Importer of OIL…. sorry, the strength of the PESO and the PRICE oil is caused by market forces…

dont expect the BSP to be able to peg the peso to a certain price… we dont have that much foreign currency reserve….

wake up and do something to lessen the b urden on your finances….you should have know this risk the moment you start earning in foreign currency…

@nina,

sorry, the condition now is different..before it was an Asian crisis…now its a US Subprime Crisis… expect USD to devaluate more in value…

dont fight the trend…its not wise to hold USD now… Even Warren Buffet advise not to hold the USD….

kamotetrader, good point on the connection between the rising oil prices and the peso appreciation. We all need a really good study by a really good economist who can look at the net effect of the peso appreciation. However, at the end of the day, I wonder if it would be a good idea to control currency movements. As you pointed out, our forex reserves may be at an all-time high. Still, it’s pretty small compared to the stash of other countries.

Hi don2x, you’re talking about forex trading, right?

Salve,

BSP already incurring losses due to their intervention..but i guess they need to slow it down…..as a sharp change is bad as well…

but for us to peg it, i guess we need something like China’s foreign currency reserve (1 TRILLION USD? )

Hi nina and smiling wanderer, thank you for your feedback. The BSP and the National Government has just last week approved the flotation of OFW bonds. I will add your comments to the ones I am sending to Doris Dumlao, the writer of the article, and Diwa Guinigundo, one of the deputy governors of the central bank. Hopefully, it can help them in their policy making. Cheers.

@Salve,

can you also ask them if the BONDS will be TAX FREE? that would make it more attractive….

Tax free instruments are only those with 5 or more years to mature, if you chose instruments with maturity earlier than that then 20% tax is applied.

The question now is what will be the interest rate of OFW Bonds? and it should be Peso denominated since dollar denominated bonds will be at loss since most forecast is in favor to Peso so why invest in dollar when everybody is definite that dollar will plunge at its lowest before this year ends….shame on them……..

EulemOFW

i will definitely not get it if its in USD…

@salve,

something like forex trading. but actually i was thinking only for the exporters who lose everytime the peso appreciates. if they are allowed to loan dollars of their projected sales and pay back in dollars, then there will be no foreign exchange loss.

@EulemOFW,

i’m not so sure even 5 or more years to mature bonds are tax free.the coupons of small denomination bonds are already deducted of taxes.treasury will have to negotiate with bir regarding tax exemptions on bonds. perhaps there are municipal bonds used to finance government projects that are tax free.regarding the OFW bonds, i think the strategy is long term where the peso forecast in the long run will depreciate.

Suggested blog topic ko lang Salve bebe… in-depth discussion on US subprime crisis and its repercussions on all of us! Man all indicators are now in uncharted territory! Oil near $100, gold headed to $1000, $ dropping like mad and headed daw to P 30, $1 trillion in mortgages owed by 2-M soon-to-be homeless American families, and they say it’s bound to get worse! Surprising how our financial markets show real resiliency amidst all these. Resiliency is what our US$-earning OFWs will need in the coming years…

I also been observing the current trend of our economy, and even research for same situation like us, but I don’t seem to know one (if someone knew please share naman).

BSP has been keeping the $ rate at bay for sometime now even there are uncertainties in our current environment - political, rising prices of commodities, rising prices of OIL and LPGas, etc. while as you say also OFWs are somewhat affected because on every $ they earned thats assuming BSP is at same time earning thru taxing their remittance. Also affected are the transport group that for months has been clamoring for fare increase because indeed they got their share of hardship because of high prices of commodities.

One thing I see that will profit in this situation is not the middlemen who are buying $s but the wealthy businessmen who are just waiting for the downfall of the $ market, while the OFW who sold the $$s will cry “FOUL”. And later call them the Poor “Bagong Bayani” (OFW).

For the BSP People please reflect the true situation of this 3rd World Country and not to disguised it as if Philippines is beautiful and ever growing while in a nutshell a little or no improvement has been done in the economy. Wake up.

hunny bunny and kamote trader,

yeah, this time, $ is also falling against other currencies due subprime issues in the US but even if $ is expected to depreciate more, I’m inclined to keep my $. Hindi naman siguro babalik sa $1 = P1. Besides, I don’t have much to keep naman.

Qatari Riyals is pegged to the dollar at QR 3.65 to $1 (it’s been like that for decades), so in essence our monthly salary is in dollars. Since I’m not based in the Phils and we don’t have plans of going home in the near future, I might as well hold on to it or invest it here, where economy is growing exponentially. Another option is to exchange it in other currency, like Euro.

BSP should create a counterflow to the strong influx of remittances and hot money pouring into the stock market. At least to slow down the sharp rise of the peso.

IMO, maybe it would help if they allow local mutual funds to invest in international assets like Asian, European, US equities.

you will only be poor OFW if you always spend all your salary monthly… well you dont have to be an OFW to do that…

don2x

aaah thats short selling pala, thats what I did last year when $=P50 I heavily borrowed expecting $ to fall P45, now I am still paying the loan with a smile hehehe…

melvin

BSP is doing a lot of counter measures and to think na nalulugi na sila just to make sure that there would be too much volatility in the Forex, hoooray to BSP… I am still hoping that we will not hit inflation of 5.1% at the end of the year although I am still sticking with $=P41.56

sorry “there will not be too much volatility” I should say

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-Denise

do we have a legit forex trading firm in the philippines?

By intervening in Forex, BSP has done a good job. This is done to preserve the liquidity of the market.
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