The Philippine Peso—Us Dollar Exchange Rate: the Impact of Strengthening Currency
INTRODUCTION
The foreign exchange market is a worldwide decentralized over-the-counter financial market for the trading of currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends. The foreign exchange market determines the relative values of different currencies. (wiki.org)
The exchange rate is the price of a unit of foreign currency in terms of the domestic currency. In the Philippines, for instance, the exchange rate is conventionally expressed as the value of one US dollar in peso equivalent.
The value of any particular currency is determined by market forces based on trade, investment, tourism, and geo-political risk. Every time a tourist visits a country, for example, he or she must pay for goods and services using the currency of the host country. Therefore, a tourist must exchange the currency of his or her home country for the local currency. Currency exchange of this kind is one of the demand factors for a particular currency. Another important factor of demand occurs when a foreign company seeks to do business with a company in a specific country. Usually, the foreign company will have to pay the local company in their local currency. At other times, it may be desirable for an investor from one country to invest in another, and that investment would have to be made in the local currency as well. All of these requirements produce a need for foreign exchange and are the reasons why foreign exchange markets are so large. (investopia.com)
In this paper the researchers attempt to show the impact of strengthening peso against the US dollar and what are the consequences behind it. It also attempt to show where should the government place itself when the opposing interest of the public are at stake.
Background
The Philippine peso has been one of the strongest currencies in Southeast Asian Region for the past two year. It
The foreign exchange market is a worldwide decentralized over-the-counter financial market for the trading of currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends. The foreign exchange market determines the relative values of different currencies. (wiki.org)
The exchange rate is the price of a unit of foreign currency in terms of the domestic currency. In the Philippines, for instance, the exchange rate is conventionally expressed as the value of one US dollar in peso equivalent.
The value of any particular currency is determined by market forces based on trade, investment, tourism, and geo-political risk. Every time a tourist visits a country, for example, he or she must pay for goods and services using the currency of the host country. Therefore, a tourist must exchange the currency of his or her home country for the local currency. Currency exchange of this kind is one of the demand factors for a particular currency. Another important factor of demand occurs when a foreign company seeks to do business with a company in a specific country. Usually, the foreign company will have to pay the local company in their local currency. At other times, it may be desirable for an investor from one country to invest in another, and that investment would have to be made in the local currency as well. All of these requirements produce a need for foreign exchange and are the reasons why foreign exchange markets are so large. (investopia.com)
In this paper the researchers attempt to show the impact of strengthening peso against the US dollar and what are the consequences behind it. It also attempt to show where should the government place itself when the opposing interest of the public are at stake.
Background
The Philippine peso has been one of the strongest currencies in Southeast Asian Region for the past two year. It
References: 1. Bangko Sentral ng Pilipinas. (2008). Adjustments in the Face of Peso Volatility: Perspective from the Past and Policy Directions.: Retrieved February 21, 2011 retrieved from http://www.bsp.gov.ph/downloads/Publications/2008/WPS200802.pdf 2. http://www.investopedia.com/ask/answers/08/what-is-foreign-exchange.asp 3. http://en.wikipedia.org/wiki/Foreign_exchange_market 4. http://www.bsp.gov.ph/financial/forex.asp 5. http://business.inquirer.net/money/breakingnews/view/20110314-325428/Peso-rises-against-dollar-as-positive-view-of-local-economy-stays 6. http://www.philstar.com/Article.aspx?articleId=565592&publicationSubCategoryId=66 7. Monetary Stability Sector of the Bangko Sentral ng Pilipinas (2006).The Exchange Rate. Retrieved from http://www.bsp.gov.ph/dowloads/publication/FAQs/exchangerate.pdf