Labor Group Predicts $1 to P40 By Year End

MANILA, Philippines (Mindanao Examiner / Nov. 25, 2007) - The Trade Union Congress of the Philippines (TUCP) on Sunday stuck to its $1:P40 year-end exchange rate outlook, and repeated its advice for migrant Filipino workers and their families here to shun the US dollar and keep whatever savings they have in peso-denominated instruments.

TUCP spokesperson Alex Aguilar warned of yet another fresh peso upsurge against the dollar in two weeks, once the US Federal Reserve -- the American central bank -- slashes its key rate some more.

"We are sticking to our outlook. The Federal Reserve is widely expected to cut its key rate by at least one-fourth of a percentage point on Dec. 11. There is even a good chance that the Fed might play Santa Claus, and surprise the financial markets with a bigger cut of one-half of a percentage point," Aguilar said in a statement sent to the Mindanao Examiner.

"A big cut in the key rate will surely the drive the US dollar down to new lows against most other currencies, including the peso," Aguilar said.The peso closed Friday at 42.85 to a dollar.

The Federal Open Market Committee (FOMC) will meet Dec. 11. The FOMC cut its benchmark rate a total of three-fourths a percentage point in its last two meetings on Sept. 18 and Oct. 31, bringing the rate down from 5.25 percent to 4.50 percent.

The rate cuts were meant to boost liquidity amid a worsening credit crunch that threatens to plunge the US economy into a recession.

Lower US interest rates would trigger an even bigger capital flight out of the US dollar.

Meanwhile, Aguilar said Filipino workers in Europe as well as their families here are largely unaffected by the strengthening peso and the falling US dollar."Like the peso, the euro has been advancing against the dollar. Thus, Filipino workers who are getting paid in euros are actually getting more value for their money in dollar terms," Aguilar pointed out.

"This is also true for Filipino workers in the United Kingdom, Canada, Australia, New Zealand and other countries whose currencies are likewise advancing versus the dollar," Aguilar said.

"Offhand, we reckon that the net effect of a rising euro on migrant workers and their families here is at worst basically neutral, since the peso is also appreciating against the dollar. At the best, they may be gaining a bit," he added.

Bangko Sentral ng Pilipinas (BSP) statistics show that Filipino workers in Europe sent home via bank channels a total of $1.79 billion in the nine months to September this year, up more than 23 percent or $340 million compared to the $1.45 billion they remitted in the same period in 2006.

In the whole of 2006, Filipino workers in Europe sent home via bank channels a total of $2.07 billion. This accounted for more than 16 percent of the $12.8 billion in total remittances received by the country that year.