There was a time, when the Philippines was just beginning to assert economic independence from the United States, when the pride of Filipinos was having their own currency with the same value as the US dollar.
The global shift from the gold standard - when the value of a currency was based on its equivalent in gold - to a floating rate - when currencies find their worth in terms of goods these can buy, led to a constant fluctuation of the respective currencies of most countries, including the Philippines.
A strong peso, which means less pesos to buy a dollar, was good when the Philippines was depending on heavy imports and exporting was not yet a major economic activity.
With globalization, exports plus remittances from overseas Filipinos make the appreciation of the peso vis-à-vis the dollar a discouraging development. The peso's value compared to the dollar has risen by at least 7 percent between December 2009 and mid-October 2010. In peso terms, a dollar is now worth P3 less than it was worth in December 2009.
Business leaders also say that based on the projected $18 billion remittances for this year, overseas Filipinos' dependents will "lose" P18 billion.
Exporters claim they cannot compete in the global markets when the exchange rate falls below P46 to a dollar - it is now hovering at P43 to $1, and some analysts are predicting the peso to appreciate further to P41 before the end of the year.
On the positive side, borrowers - including the government - whose loans are denominated in dollars, will spend less (in terms of pesos) in paying off their loans.
Also, the strong peso will help keep inflation low, particularly with respect to imported goods like oil products.
The situation is not unique to the Philippines. Other countries in East Asia, which are leading the global economic recovery, are attracting investments from the US as part of its effort to recover from the financial crisis.
The flow of dollars into emerging markets like the Philippines pushes up the value of these countries' currencies and, conversely, depresses the value of the dollar, which is good for the US because it makes American goods cheaper in the export markets.
On the other hand, the appreciation of the currencies of the emerging economies makes their exports to the US and other developed countries more expensive and thus less competitive, so these countries are also trying to halt the rise in the value of their currencies.
In the Philippines, for example, the Bangko Sentral ng Pilipinas is looking at relaxing rules on the outflow of dollars through travel and overseas investments. In simple terms, the plan is to reduce the supply of dollars in the local markets to make dollars more expensive in terms of pesos. It's basically an application of the law of supply and demand.
For individuals, including the families of overseas Filipinos, the appreciation of the peso may drive them to save the dollars they receive until the exchange rate moves up in favor of the dollar. Others may decide to invest their money in interest-bearing securities or deposits, in the stock market or in real estate before the peso appreciates further.
In the end, the strengthening of the peso has pros - like lower import costs for fuel and lower debt servicing - and cons - like less peso earnings from exports and from remittances. The challenge, really, is to look for opportunities that arise when the peso-dollar rate moves up or down.
The global shift from the gold standard - when the value of a currency was based on its equivalent in gold - to a floating rate - when currencies find their worth in terms of goods these can buy, led to a constant fluctuation of the respective currencies of most countries, including the Philippines.
A strong peso, which means less pesos to buy a dollar, was good when the Philippines was depending on heavy imports and exporting was not yet a major economic activity.
With globalization, exports plus remittances from overseas Filipinos make the appreciation of the peso vis-à-vis the dollar a discouraging development. The peso's value compared to the dollar has risen by at least 7 percent between December 2009 and mid-October 2010. In peso terms, a dollar is now worth P3 less than it was worth in December 2009.
Business leaders also say that based on the projected $18 billion remittances for this year, overseas Filipinos' dependents will "lose" P18 billion.
Exporters claim they cannot compete in the global markets when the exchange rate falls below P46 to a dollar - it is now hovering at P43 to $1, and some analysts are predicting the peso to appreciate further to P41 before the end of the year.
On the positive side, borrowers - including the government - whose loans are denominated in dollars, will spend less (in terms of pesos) in paying off their loans.
Also, the strong peso will help keep inflation low, particularly with respect to imported goods like oil products.
The situation is not unique to the Philippines. Other countries in East Asia, which are leading the global economic recovery, are attracting investments from the US as part of its effort to recover from the financial crisis.
The flow of dollars into emerging markets like the Philippines pushes up the value of these countries' currencies and, conversely, depresses the value of the dollar, which is good for the US because it makes American goods cheaper in the export markets.
On the other hand, the appreciation of the currencies of the emerging economies makes their exports to the US and other developed countries more expensive and thus less competitive, so these countries are also trying to halt the rise in the value of their currencies.
In the Philippines, for example, the Bangko Sentral ng Pilipinas is looking at relaxing rules on the outflow of dollars through travel and overseas investments. In simple terms, the plan is to reduce the supply of dollars in the local markets to make dollars more expensive in terms of pesos. It's basically an application of the law of supply and demand.
For individuals, including the families of overseas Filipinos, the appreciation of the peso may drive them to save the dollars they receive until the exchange rate moves up in favor of the dollar. Others may decide to invest their money in interest-bearing securities or deposits, in the stock market or in real estate before the peso appreciates further.
In the end, the strengthening of the peso has pros - like lower import costs for fuel and lower debt servicing - and cons - like less peso earnings from exports and from remittances. The challenge, really, is to look for opportunities that arise when the peso-dollar rate moves up or down.
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