Forex: Cheers and whimpers
“We can’t please everyone”, our forefathers said so, then. Centuries past and the same admonition remained true and real. Certainly, as generations come and go, it will forever stay.
For instance, President Duterte’s declaration of Martial Law in Mindanao was met with both appreciation and denunciation. The fact is, while some found it appropriate, others went to the Supreme Court questioning its constitutionality.
Likewise, the same is true with our peso-dollar exchange rate. Recently, whether in barbershop talks or economic briefings, we didn’t hear anything but complaints about the peso’s deterioration against the US dollar. Hovering around P 50.00 to a US dollar, it seems like, nobody is happy, not anyone gained.
On the other hand, when it was at its strongest on February 28, 2008 at P40.40460 to a dollar (per OANDA), calls for civil disobedience were even floated. The clamor (particularly, the OFWs) to peg the peso-dollar exchange rate at P55 to a dollar, likewise, mounted.
Conversely, almost eleven years ago (on July 17 2006), when the exchange rate was a seemingly uncontrollable P54.8620 to a dollar, both educated and unschooled critics became instant prophets of doom. Doomsayers, as they have always been, were trumpeting here and there that the country was holed into a bottomless pit, a hopeless situation.
Today, as the optimism in the USA rises and the Federal Reserve is considering a hike in interest rate, the peso-dollar exchange rate is, again, slowly tilting in its (USA) favor. Thus, exporters, BPOs and some related businesses are beginning to rejoice. Importers (except for oil industry players because global prices have remained below US$50.00 per barrel), on the other hand, are starting to feel the pinch.
Undeniably, either way, we shall hear cheers and whimpers. This is not something unusual though. It doesn’t mean too, that, we are hard to please. The fact is, wherever our peso goes, we will always hear complaints. In every abrupt fall, a sector gains while another losses. When it goes up sharply, more often, the sector that rejoices in its fall complains.
These reactions are not difficult to understand. It all boiled down to preferences. Similarities can be attributed to a saltbed owner and a rice farmer. They have different preferences. A saltbed owner rejoices in el niño (long droughts) but gripes in la niña (extended rainy seasons) because long dry spell give him tons of salt while wet seasons melt it. The rice farmer, on the other hand, feels exactly the opposite because droughts empty his barn and rainy days bring him bags of grain.
So, who really are rejoicing in a weaker peso? On top of the list are companies/individuals that/who are earning in dollars and are spending in pesos. They are exporters that are sourcing out their raw materials and labor locally like furniture makers, dried mango processors, BPOs as well as our OFWs.
Inversely, importers of surplus items like dump trucks, heavy equipment, generators, AUVs, SUVs and used clothing (ukay-ukay) will rejoice in a strong peso. Apparently, there is one thing common among these importers. They import and sell their wares in the local market. Clearly, they spend in dollars and earn in pesos.
Simply put, a company is in a better position once it earns in a stronger currency and spends in a weaker one. However, while it may sound counterbalancing considering that in either scenario some benefit and others agonize, we can’t just simply be content and drifts. Knowing fully well that there is no panacea that can comprehensively solve all our economic woes, the complexities rest not much on the solution (which will favor some sectors) we put in place, but on its impact on those in the receiving end.
Therefore, what is important right now is for our government to use all available options to having a stable peso or a manageable exchange rate. Moreover, they should put in place meaningful cushions that can mitigate whatever negative impact the peso’s movements bring on the “aggrieved sectors”. This way, instead of worrying so much on a very erratic currency, companies/individuals will rather spend time in planning ahead and formulate responsive strategies.
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