What will happen if the US dollar is strong and peso is weaken?
Financials institutions now see the peso ending weaker against the strong dollar. The paradigm shift was bought by an improving United State economy, which made US assets more attractive to investors, particularly after Federal Reserve may hinted at trimming its bond-buying stimulus as the economy further improves. A depreciation trend may not be avoided on strongest dollar sentiment because a positive on it is that a weaker peso is advantage to local industries and families overseas Filipino workers and it is good for the competitiveness of the Philippine economy, and it’s not only for good for exports but even for the entire local industries that compete with imports. Imports now become more expensive than the local products, so there would be more local production and by that it will create jobs. Increase purchasing power of OFW dependent families will spur consumer spending and in turn to drive economic growth. To a degree the recent weakness in PHP does allow the BPO to remain competitive, the pesos weakness highlighted volatility- or sudden ups and downs in the exchange rate but according to the analyst short-term volatility should not be cause for worry as the country’s foreign reserves recorded at $82.9 billion as of end of may which is provided by the BSP to cushion upsides risk. Inflation is not in focus because the BSP has likely been smoothing the movements in the PHP and the size of reserve suggests that it will be well placed to limit excessive volatility in either direction for the PHP said the HSBC. Currency traders at local foreign bank who requested anonymity to protect their positions in the spot market said the BSP intervenes in the market when peso moves, win or lose within the day. The adjustment in monetary policy will only be employed should a weaker peso significantly stoke inflation or a rise in consumer prices. At the moment this does not appear to be the case...
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