This paper tackles the effects of the foreign exchange rate as a whole and how it affects the country and at the same time how it gets affected. This paper enumerates the advantages and disadvantages of having a strong Peso. The paper also discusses what factors affect the strengthening and weakening of the Philippine Peso. This paper also includes an in depth analysis of how the foreign exchange could affect and gets affected by the economy, the society and politics.
The Philippine exchanged rate is express in terms of one unit of dollar versus one unit of peso. There are two cases on how an exchanged rate would be determined the first system is the free floating exchange rate where the supply and demand force of the market is the index and the other system is the fixed exchange rate given directly by Bangko Sentral ng Pilipinas. The free floating exchange rate would be given more consideration since it's the system that mostly affect our economy and being supported by BSP adopted since 1970. In the cases when the demand and supply is not stable, the BSP has the authority to enter and provide guidance in the market to prevent the volatility effects in the exchange rate fluctuations that affects inflation. They also fixed firmly the demands for foreign currency by providing liquidity when required. This system applied in the Philippines is consistent with its goal to aim external competitiveness through market efficiency. Peso appreciation provides numerous benefits on our economy like lowering inflationary expectations or pressures and added additional savings resulted from foreign debt servicing but it also negatively affects the export market and the beneficiaries of the remittances given by the OFW.
The peso continues to struggle in the year 2005 but compared to 2004 it appreciated by 1.72%. The factors that affect the peso and help increase the standing of our economy are the remittances by the Overseas Filipino Workers on... [continues]
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