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Dh1 = Ph14

by | TOP STORIES

Jul. 20, 17 | 7:52 am

The peso recently slid to its lowest level against the dirham in 10 years at Ph13.86 and  industry experts say this trend will continue for months, hitting the Ph14 mark “anytime.”

But while most overseas Filipino workers may be jubilant about this due to the expected windfall, experts caution that the peso depreciation will result to increased monetary value of basic commodities back home due to higher import costs, albeit not that soon. This, they say, would actually necessitate more remittances in the future to keep up with the price hikes.

The dirham is hinged to the dollar, which has been growing more robust following rate hikes implemented by the US Federal Reserve that, in turn, has so far resulted to a peso-dollar exchange hovering at Ph50.65 as of press time.

Ph14-mark

“There is a high probability that we will reach the Ph14-mark anytime this year,” Michelle Sanchez, head of UAE Exchange’s Philippine Corridor Marketing, told The Filipino Times. “The projection is Ph14.20 by the end of the year,” she added. UAE Exchange is among major money transfer companies in the UAE.

Noel Fernando C. Cristal, general manager at  Cebuana Lhuillier Services Corp., a remittance service provider, agreed.

“The peso would depend on its performance against the US dollar.  This would directly influence the exchange rate between the peso against the dirham. Needless to say, if the peso weakens against the US dollar, then it will follow the same path against dirham,” Cristal explained.

“With the continued rate hikes implemented by the US Federal Reserve, it would not be hard to see that trend continuing, even hitting Ph13.90 to Ph14 by end of the year,” he added.


Matthew Boast, Chief Business Officer at Wall Street Exchange, while dismissing speculations about a Dh1-Ph15 rate as “impossible for this year,” said the projection is that the “rate will continue to go up.”

Aside from the strengthening of the dollar, he said another factor causing the peso depreciation are the ongoing war in Marawi City, Lanao del Sur in Mindanao which started May 23 this year. Still another factor, he said, is that “there are not enough investors coming to the Philippines.”

Major setback

Sanchez said the increase in the peso-dirham rate should not at all be construed as good news for OFWs because it actually is a major setback to the purchasing power of the peso.

“While it is true that OFWs feel happy because their salary has more peso equivalent, the prices of basic commodities in the Philippines simultaneously increase; and so it then doesn’t make much difference,” she explained.

“Furthermore,” she added, “if the Philippine peso continues to be weak, payment of foreign debts and global trade will be greatly affected, which will cause higher prices of basic commodities and lead to more expensive goods.”

On the other hand, Cristal, for his part, said a depreciated peso would allow OFWs to have more cash to spend and provide for the opportunity to save as they would be sending less money home.

Concurring, Boast said “prices of everything will increase” back home as a result. “Take advantage of the high rate and start saving in your personal bank accounts,” he said.

Another remittance company official meantime said the anticipated corresponding increase in prices of basic commodities brought about by higher import cost would not happen immediately because orders had already been placed. “Sa mga susunod na order yun mararamdaman, which is in the next two months or so,” he said.

The official, requesting anonymity, added that from an import-export perspective, a devalued peso would be a boon to exporters because “mas malaki ang kikitain  kasi mas mababa ang piso; nagiging attractive and products nila.”

“Ganito actually ang ginagawa ng China, sinasadya nilang i-devalue ang yuan para mas maraming bumili ng mga exports nila,” he said.

The official added that investors would also prefer a devalued peso “because they can have more for less dollars.”

Remittance behavior

Money exchange companies are not expecting a spike in business resulting from the increase in the peso-dirham rate.

Explained Sanchez: “In times like this, Filipinos tend to send more and take advantage of the situation thinking that there is more value for their dirhams, most especially to the Filipinos who have savings in dirhams.”

“But based on the remittance behavior of  majority of Filipinos, we cannot really say there is an increase in number of remittance since Filipinos send their salaries regardless of the rate,” she stressed.

Added Cristal: “To the contrary, the swell in rates lessens the frequency of remittance transactions. OFWs tend to wait, hoping for more favorable rates before sending money.”

“They closely watch the trends and send funds when they think the exchange rates are at its peak,” he said.

At a glance: The peso via-a- vis the dollar and dirham this year

Forecast Q1/2017 Q2/2017 Q3/2017 Q4/2017
Peso to dollar Ph50.23 Ph50.72 Ph51.22 Ph51.72

Peso to Dirham          Ph13.69            Ph13.82     Ph13.96     Ph14.10

Philippine peso to the dollar and to the dirham.


Peso to Dirham          Ph13.69            Ph13.82     Ph13.96     Ph14.10

Philippine peso to the dollar and to the dirham.

Source: Trading Economics

Trading Economics, a global portal providing data on indicators and statistics in over 200 countries, said the Philippine peso is forecast to be at Ph50.23 to the dollar in the first quarter of 2017; Ph50.72 in the second; Ph51.22 in the third; and Ph51.72 in the fourth.

With the dirham tied to the dollar, this would mean a peso-dirham exchange rate pegged at the Ph13.69 range in the first quarter; Ph13.82 in the second; Ph13.96 in the third; and Ph14.10 in the fourth.

Actual peso exchange rate to the dirham as of July 3, 2017 (ending second quarter and into the third) was Ph13.78

“We model the past behavior of Philippine peso using vast amounts of historical data and we adjust the co-efficients of the econometric model by taking into account our analysts’ assessments and future expectations,”    Trading Economics explained in its report.

The last time the peso-dirham rate hit the Ph14 mark was in Jan. 2006 at Ph14.43, according to data from Wall Street Exchange, a UAE-based remittance company. The exchange rate was highest in Jan. 2004 at Ph15.11, also according to Wall Street Exchange.

The peso-dirham rate in the past 10 years

        Jan. 1, 2007- Dh 1- Ph 13.3

Jan. 1, 2008- Dh 1- Ph 11.2

Jan. 1, 2009- Dh 1- Ph 12.96

Jan. 1, 2010- Dh 1- Ph 12.5

Jan.1, 2011- Dh 1 – Ph 11.8

Jan.1, 2012- Dh 1 – Ph 11.9

Jan.1, 2013- Dh 1 – Ph 11.17

Jan.1, 2014- Dh 1 – Ph 12

Jan.1, 2015- Dh 1 – Ph 12.17

Dec. 20, 2016- Dh 1 – Ph 13.58

Jul. 11, 2017 -Dh1 –  Ph13.86

Source: Wall Street Exchange

Why does the US dollar exchange rate fluctuate?

It all boils down to the Federal Reserve, the United States’ central banking system formed in 1913 to ensure that the dollar survives crises like the Great Depression of the 1930s and the recession of the 2000s.

Last month, the “Fed,” as it is called, hiked interest rates for the second time this year, “in a widely expected move that reflects the central bank’s confidence in the U.S. economy,” reported Forbes.

Much of the world borrows money in dollars or seeks to lend to the US government and US corporations in dollars,” stated another report by The Guardian.

“A rise in interest rates would encourage an influx of funds into the US, pushing up the dollar relative to other countries. A rise in the Fed funds rate would also increase the cost of borrowing,” it added.

What happens next is that the return on savings to a high-interest rate currency, in this case the dollar, becomes more attractive than in other currencies thereby resulting to its appreciation in terms of exchange rates with low-interest-rate currencies of developing countries like the Philippines, experts say.

The dirham is tied to the dollar, meaning the dollar’s exchange rate to the peso would be the same as the dirham’s.

 

 

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THE FILIPINO TIMES is the biggest and most trusted Filipino newspaper in the UAE.

It has a print run of 60,000 copies and 250,000 readership per week; bolstered by 2.5 million visitors to its website every month. It also has an e-newsletter sent to its 250,000 subscribers every day.

The Filipino Times is FREE and has the widest targeted circulation across the 7 emirates of the UAE.

With more than 2,500 strategic distribution spots, TFT is available where the Filipinos are - at Smart Bus Shelters, Metro Stations, restaurants, supermarkets, schools, airport lounges, Emirates and Etihad Philippine-bound flights, churches, Filipino community events and many more.

THE FILIPINO TIMES. We are where the Filipinos are.

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