Peso may rise to P38 in 2008

To those earning in or holding US dollars, brace yourself because the Philippine Peso might appreciate some more and even increase to P38 by next year.

That’s according to a BusinessWorld article published today:

The peso may appreciate towards P41.50 per dollar by year end and to as much as P38 by early 2008 as dollar remittances from overseas Filipino workers (OFWs) and inflows from the asset sale of local firms surge.

“The surge of dollars gives support to the thought that the peso will be stronger than what it is today… It’s a more sustainable trend right now,” Michael G. Manuel, chief investment officer of Sun Life of Canada (Philippines), Inc. told reporters yesterday.

Mr. Manuel attributes the possible appreciation of the Philippine currency to the sale of assets by local companies, increased remittances of Overseas Filipino Workers (OFW), and expected interest rate cut of the US Federal Reserve.

San Miguel Corp.’s sale of its stake in National Foods, Del Monte Pacific and Coca Cola Bottlers this year generated about $2.6 billion, while the government’s sale of its stake in Masinloc and Calaca power plants in the third quarter added $1.2 billion to the local economy.

More dollars are expected to flow into the country in 2008 as OFW remittances are predicted to grow by 5% from this year’s $14-billion projection.

The anticipated rate cut of the US Federal Reserve in December is also expected to bolster the peso. The Fed’s half-point key policy rate cut in September pushed the peso to P44.90 from P47 per dollar, while the 25-basis-point cut in October caused the peso to strengthen to P43.50 per dollar.

The peso appreciation will surely affect OFWs and local merchants and earners who receive payment in US dollars.

Tell us: Are you ready for such occurrence? How are you preparing for the expected appreciation of the peso?

(Later this week we’ll post an article containing some tips on how to deal with the falling dollar.)