Labor group sees US$ 1 to P40 by year's end ...

Labor group sees US$ 1 to P40 by year's end, renews call for OFWs to shun US currency & stash savings in pesos.

The Trade Union Congress of the Philippines (TUCP) has repeated its call for overseas Filipino workers (OFWs) to dump their US dollars and hoard their savings in pesos, warning that the greenback would likely fall to as low as P40 by year's end, should US interest rates drop some more.

"We are strongly urging our OFWs and their families here to protect the value of their savings by investing in pesos and avoiding the dollar, in view of the increased probability that lower US interest rates will soon trigger a bigger flight out of the (US) currency," TUCP spokesperson Alex Aguilar said.

The US Federal Reserve cut its key rate by half a percentage point last month from 5.25 percent to 4.75 percent, in order to ease liquidity amid a worsening credit crunch that threatens to plunge the US economy into a recession.

The rate cut spurred a sell off in the US currency that saw the peso swiftly climbing to almost 44 to a dollar, from 47. The peso closed at 44.75 to a dollar on Friday.

"Our projection of a US$ 1 to P40 rate is based on the assumption that the US Federal Reserve will cut its key rate by another half a percentage point before the year ends," Aguilar pointed out.

The US Federal Reserve will meet Oct. 30-31 to decide what to do with its key rate.Lower US interest rates tend to drive investors to sell their dollars and dollar-denominated instruments in search of higher yields.

But even without any further US rate cuts, Aguilar said the US dollar remains "basically weak" and is bound to further decline against the peso and other foreign currencies in the months ahead.

The dollar's steady decline has been attributed to the growing US debt and the widening US current account deficit.

"Again, we must stress that we are simply looking out for our OFWs and their families, who clearly risk losing a lot of value for their money if they continue keeping their savings in dollars," Aguilar said.

The European banking giant Banque Nationale de Paris-Paribas earlier predicted that the peso would surge to 43 to a dollar by year's end, 37 to a dollar by next year and 30 to a dollar by the end of 2009.The Hong Kong and Shanghai Banking Corp., meanwhile, sees the peso firming up at 43 to dollar by year's end, 41 a dollar by next year and 40 to a dollar by the end of 2009.

Should BNP Paribas' projection materialize, P100,000 in savings now (or US$ 2,234 converted to pesos at P44.75 to US$ 1), could be switched back to US$ 3,333 in about 24 months. In dollar terms, this translates a gain of US$ 1,099 or almost 50 percent.

-ofw.balita.ph

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