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GUESS none of us ever thought that in our lifetime this sort of
financial advice would be imparted by an authoritative voice to
overseas Filipino workers. But here we go, folks!
In boldly predicting a bigger peso surge versus
the dollar in the weeks ahead, the Trade Union Congress of the
Philippines (TUCP) is calling on OFWs to forget about the dollar and
consider placing their hard earned savings in peso accounts.
“We now see the dollar at P37 to P38 by early
summer. We are thus renewing our guidance for overseas Filipino
workers and their families here to continue to shun the dollar and
keep their savings in pesos,” said TUCP spokesperson Alex Aguilar
whose influential organization is basing its counsel on falling US
interest rates that are bound to set off more capital flight out of
the greenback.
Aguilar also urged regulators to find ways to
compel local banks to reduce their “oppressive and burdensome”
remittance charges, in order to help lessen the powerful peso’s
jolt on migrant workers and their families—a call that has also
been made by Senator Loren Legarda through a Senate resolution she
tabled four months ago.
Stated Aguilar: “We are now convinced that,
amid the lingering subprime mortgage crisis, credit crunch and
housing slump that threaten to drag the broader US economy down, the
Federal Reserve will have no choice but to bring its key rate down
to as low as 2.50 percent.”
The Federal Reserve—the American central
bank—is widely expected to cut its key rate on January 30 by 50
basis points or one-half a percentage point, from 4.25 percent to
3.75 percent, and then follow this up with more cuts in future
meetings in March, May and June.
Already Goldman Sachs, one of the world’s
leading investment banks, warned of a US recession, and predicted
more aggressive rate cuts by the Federal Reserve.
Since September last year, the Federal Reserve
has already cut its key rate three times, by a total of 100 basis
points, or a full percentage point, from 5.25 percent to 4.25
percent.
Aguilar described as “self-fulfilling” the
peso’s rise versus the once mighty US dollar. As the peso
continues to advance, the government and the private sector are
seizing the opportunity to pay down, or totally get rid of, their
dollar-denominated debt obligations.
This has had the effect of diminishing the
future need for dollars intended to service debts, thus creating an
excess dollar supply going forward.
The TUCP’s Aguilar also said migrant
Filipino workers are actually sending home more dollars to
compensate for the strong peso, thus further bloating the dollar
surplus.
“If a family wholly dependent on remittances
needs P15,000 monthly to cover living expenses, the head who is
abroad has no choice but to now send home about $368 monthly to
produce the P15,000 at $1:P40.74, compared to only about $267 four
years ago, when the rate was $1:P56,” he said.
Aguilar cited a report by the Bank of the
Philippine Islands which indicated that prior to the peso’s sharp
appreciation versus the dollar, Filipino workers abroad sent home an
average of $300 to $500 per transaction in 2006.
In 2007, when the peso gained almost 16 percent
versus the dollar, the average amount sent home by migrant workers
increased to $350 to $550 per transaction, according to BPI, which
corners almost one-fourth of the total amount of remittances sent
home by migrant Filipino workers every year via the banking system.
The peso was one of the world’s
best-performing currencies in 2007, gaining nearly 16 percent versus
the dollar. The local currency closed at 41.28 to a dollar in 2007,
up 15.8 percent from its close of 49.03 to a greenback in 2006.
Curiously though, big entities like PLDT and
Meralco that for decades have been charging customers fees in the
monthly billings to cushion itself from the financial perils of the
peso fluctuating against the then mighty dollar do not seem to be
rushing to giving customers any respite now that the trend has been
seriously reversed.
But that, as they say, is another story—for a
congressional hearing, perhaps?
rjottings@yahoo.com
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