If you’ve been reading about the foreign exchange markets long enough, you know that forecasting where the peso will end up, say, at the end of the year is futile. I daresay the foreign exchange markets is as fickle, or even more so, than the lady next to you and as temperamental as the toddler next door!

During the height of the Asian financial crisis in 1997 when the peso-dollar rate was the staple story in business pages, I spent so much time tracking the foreign exchange markets that one night, I woke up after a nightmare mumbling “The peso! The peso!”

That can happen to you when you wait for hours until late at night sprawled on the floors of the Bangko Sentral ng Pilipinas just to get first crack at what the Monetary Board members talked about.

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I’ve been hearing this advice from a lot of people lately: Get out of the dollar. Put your money in pesos, euros, Canadian dollars and other currencies.

This begs the question: Is the dollar a doomed currency?

After the Fed rate cut, investors rallied towards the peso, causing it to gain a surprising half a peso in just one day. [Read the rest of this entry »]

I was so intrigued by implied forward rates that I asked Noet Ravalo for more explanations. Here is his first guest post on MoneySmarts:

Let me put my teacher cap on. Example na lang. Mas madaling intindihin. What if investor has P1 million to invest. Choices are a peso one-year Treasury at 6% versus a one-year US Treasury at 4%. What will investor do? Answer = he needs to read Salve’s blog to find out what implied forward rates will do.

Let the peso-dollar rate be P50 to one so that the P1 million is $20,000. For as long as peso returns are higher, the investment decision is obvious (go with peso treasury). But what comprises the return are (a) the outright interest and (b) the value of the currency upon maturity. So, “return” is interest rate LESS depreciation.

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Do you often feel that itch to check how the peso is doing? Are you dismayed every time the peso strengthens (thanks for the correction, Gretch!) further against the dollar, worried that your earnings in dollars are losing value?

Are you exclusively focused on the dollar?

Are you still depending exclusively on one type of investment like real estate investments, or time deposit placements etc?

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Financial markets are fickle animals. They can turn anytime. Plus, there are too many things that affect them, not just in our country but movements of other markets. So, whenever I hear forecasts especially on the peso-dollar exchange rate, I listen to them but with more than just a grain of salt.

But I’m addicted to asking my sources for their forecast. Picture me with my clunky recorder (I still use that kind, not the minuscule ones newbies carry nowadays), lunging after a financial market expert attending a conference, tugging at his sleeves, stepping on his toes – whatever I can do to catch his attention because I’m not even five feet tall – and asking, “Sir, sir, what’s your forecast on the peso?” with my notepad and big fat ballpen already in front of me. Sigh. Journalists are mixed up persons!

The truth is, I have been trying to get my sources to give me their projections for the peso-dollar exchange rate. So far, the most remarkable forecast is P44 to the dollar. Did that shock you?

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