OWWA responds to calls to change Peso Dollar Rates

Philstar reports OWWA will adopt a flexible membership exchange rate

"To finally put a closure to the controversy over fees collected from overseas workers, the Overseas Workers Welfare Administration (OWWA) would soon be adopting a flexible exchange rate in the payment of membership fee.

OWWA chief Marianito Roque said the OWWA board has approved a new resolution providing adjustment mechanism in the collection of $25 membership fee.

“We recognized the volatility of the peso dollar exchange rate so starting January 1 we would be using a flexible rate based on the preceding month’s average,” Roque explained.

“This means that OWWA on January 1 will be recognizing the monthly average dollar exchange rate in December 2007 as basis in the collection of fees,” Roque added.

Roque said OWWA resolution No. 38 also provides a crediting mechanism that would extend for three months the insurance coverage for overseas workers who were overcharged by P225"

Seaweed exports to decline due to strong Peso Dollar rate

Seaweed exports industry expects to lose Php2 billion pesos due to strong peso, according to news in Inqiurer.net.

"The seaweed industry expects to lose more than P2 billion of the peso value of exports this year, largely because of the rapid rise of peso, an industry leader said.

Even if exports reached $180 million from last year’s $165 million, the peso equivalent this year would be much less than the 2006 level, said Benson Dakay, president of the Seaweed Industry Association of the Philippines.

Last year, with an exchange rate of P55-P56 to the dollar, last year’s exports reached more than P9 billion, Dakay said in an interview.

This year, at an exchange rate of P40-P41 to the dollar, sales are likely to only P7 billion, he said."

Peso Dollar rates range-bound

Peso Dollar rate in thin trading range according to Inquirer.net:

"Asian currencies moved in tight ranges on Thursday as the year-end festive season and continuing wariness about the US economy kept investors sidelined.

The Philippine peso hovered near 41.84 per dollar, flat on Wednesday's close, after briefly hitting 41.72 in early trade.

A small majority of analysts polled by Reuters expected the Philippine central bank to cut its overnight rate by 25 basis points to 5.25 percent later on Thursday, matching the US Federal Reserve's latest move."

Calls to Protect OFW earnings from Peso Dollar Rate fluctuations

Dan Mariano's Big Deal column in the Manila Times calls for protection to OFW money:

" MONDAY morning when this column was being written, the peso-dollar exchange rate opened at P41.40:$1 against the previous close of P41.21:$1. This allowed greenback holders to get more pesos for their money—but only briefly.

The consensus, especially in the Philippine Dealing System, is that the peso will continue to grow in strength thanks to the rising remittances of overseas Filipino workers—especially during the Yuletide, the positive developments in the Philippine economy and the continuing weakness of the American currency.

Along with other economic targets, the Development Budget Coordination Committee (DBCC) has revised its forex assumption to between P42 and P45 to the US dollar until 2010. It was the fourth time the Cabinet-level DBCC has had to revise its forex range. Last July it decided to adjust its assumption to P46-P48 from P48-P50 last January. The original target range was P51-P53.

This year alone the Philippine currency has risen in value by nearly 20 percent. According to DBS Bank Ltd., Singapore’s largest bank in Singapore, the Philippine peso beat nine other Asian currencies. The Indian rupee, for instance, appreciated by 12.4 percent and the Thai baht 7.5 percent.

The Bangko Sentral ng Pilipinas said the peso averaged P42.798:$1 as of end November—compared to the 2005 average of P46.549:$1.

Double-edged sword

That’s good news at the macroeconomic level. Closer to the ground, however, the peso’s spectacular rise is turning out to be a double-edged sword—wounding paradoxically the families of OFWs who are contributing mightily to the currency’s strength.

Calls have been made to artificially peg the peso-dollar exchange rate, but this would require the government to fork out billions of pesos in subsidy. In the long run taxpayers—including OFWs and their families here—would have to support the artificial rate through more taxes. Obviously this proposal makes no sense.

Meanwhile, BSP officials, notably Deputy Governor Diwa Guinigundo, have been urging OFWs—and exporters—to hedge their funds. The problem is that not too many banks are keen to extend this financial safety net to our compatriots abroad who see the value of their earnings erode on a daily basis.

Breaking ranks with the Shy­locks, the state-run Development Bank of the Philippines is reportedly planning to offer a hedging facility, which it hopes would help soften the negative impact of the peso appreciation on the buying power of OFW families.

Under the plan, OFWs who voluntarily subscribe to the program would agree to send home a fixed amount of dollars every month for at least one year through DBP’s remittance network worldwide. In exchange, the bank pledges to convert the OFWs’ dollars based on a pre-agreed exchange rate.

The Trade Union Congress of the Philippines has said it welcomes the DBP’s plan, which TUCP calls a “fixed” peso-dollar exchange rate, but is actually an innovative hedging mechanism."

Investors Sell Stocks, Peso Drops

From Bloomberg, concerns on Fed rate cuts spurs investors to sell off stocks, forces peso to fall.

"Asian currencies fell, led by the Philippine peso and the South Korean won, as concern the Federal Reserve will cut interest rates less than expected prompted investors to sell emerging-market equities.

All of the 10 most actively-traded currencies in Asia outside Japan dropped today as stocks slumped on concern faster inflation will slow consumer spending in the region's biggest export market. Foreign investors were net sellers of shares in South Korea, Taiwan and the Philippines, according to data from stock exchanges.

``The dollar is strengthening across the board,'' said Hideki Hayashi, a foreign-exchange strategist at Shinko Securities Co. in Tokyo. ``In addition, regional stocks slumped, leading to speculation investors will dump Asian equities.''

The Philippine peso plunged 1.1 percent to 41.655 at the 4 p.m. close of onshore trading, according to Philippine Dealing & Exchange Corp. South Korea's won closed at the lowest since Sept. 11, down 0.4 percent to 933.60, according to Seoul Money Brokerage Services Ltd.

The won may trade between 930 and 935 this week, Hayashi said.

Interest-rate futures on the Chicago Board of Trade show 80 percent odds policy makers will lower the target overnight lending rate between banks a quarter-point to 4 percent in January, compared with 96 percent chances a week ago.

``Given potential inflation, the Fed will probably cut less,'' said Jonathan Ravelas, market strategist at BDO Unibank in Manila. ``There will be some correction for emerging market currencies including the Philippines.''"

Peso slides against Dollar

From the desk of Doris Dumlao, Inquirer: Peso slides below P42-$1 level before closing at 41.98.

"The peso Tuesday slipped back to the 42-per-dollar level before closing at 41.98 as the market locked in gains while scaling back expectations of aggressive interest rate cuts by the US Federal Reserve, currency traders said.

Traders added that cash remittances from overseas Filipino workers for Christmas spending had thinned out this week because bulk of the money had been frontloaded in previous weeks.

The peso reached an intraday low of 42.08 to the dollar and a high of 41.80. At the end of trading it was down from Monday’s closing rate of 41.655 to the greenback.

The peso’s downward correction for the second trading session was expected after almost two weeks of rising to nearly eight-year highs, traders said.

Banco de Oro-EPCI Bank strategist Jonathan Ravelas said the peso was pulled down by a knee-jerk reaction to the dollar’s rebound against major currencies and by expectations that the US Federal Reserve would veer away from aggressive monetary easing. "

RP Gov't cuts Dollar Borrowings in Favor of Peso

In the Inquirer, the RP gov't is considering cutting dollar-denominated foreign borrowings in favor of peso-denominated local loans to ease pressure from the rising peso.

"The government may further cut its 2008 foreign borrowings in favor of domestic loans to ease the impact of a strengthening peso on exporters and families of overseas Filipino workers, Finance Secretary Margarito Teves said.

Teves said the government’s recently revised borrowing mix of 70 percent domestic and 30 percent foreign -- from the previous 64:36 -- could still be changed.

“As of the moment, this is the borrowing program,” Teves said at a news briefing Tuesday. “But the government could stretch it further to 75:25 in favor of more domestic borrowings depending on opportunities.”

Teves said a 30-percent foreign borrowing share next year would translate to $2 billion, or P90 billion at the exchange rate of P45 to the dollar that government officials use.

A 25-percent foreign share would be $1.67 billion, or P75 billion.

The peso recently broke into the 41-per-dollar territory, averaging 46.6 to the dollar from January to November.

The 2007 government budget had assumed an exchange rate of P47-P49 per dollar."