The stand of Philippine Peso in FOREX trading
In the foreign currency market, the U.S. dollar has been the basis of trading. The U.S. is a country known to have a more stable economy than other countries. Over the years, Asian currencies rely on how the US and European market evolves. It has been their indicator used to determine their own currency's value.
Now, the Asian market seems to work side by side with the leaders in the world economy. Most developing countries are now getting a relevant spot in FOREX trading. The Philippine peso is one perfect example of an Asian currency who is finding ways of uplifting its value in the market.
During the 1970's the ratio of the U.S. dollar over Philippine peso was 2:1. This was when the economy was stable; there is control over the peace and order situation of the country, and few sensationalized news stories of graft and corruption. Things were running smoothly.
After 20 years, when the Philippines regained democracy, the Philippine peso slowly declined losing its stability as compared with other Asian currencies. The government's credibility was questioned; economy was shying away from potential investors. The value of a country's currency depends on many factors such as; government, people, economic situation and political stability.
If the people do not trust the government due to some controversies arising from graft and corruption, then it creates a flaw in their currency and will be unappealing for FOREX trading. A nation's political stability is one important basis for traders around the world. If a country's politics has much disparity, like politicians cannot agree with each other, or politicians keep on sensationalizing every detail just to hit on others. They are not only hitting their opponent but also hitting their economy.
Foreign traders or investors will hesitate to trade your currency because situations like these contribute to currency instability. They know that a currency will not continue to depreciate; soon it will appreciate but the question is when?
For the past six years, the Philippine peso is slowly climbing its way up. It came to a point when the rate is 59:1 U.S. dollar. It struggled but now it is slowly recovering from its downfall. In economics there is what we call "vicious cycle" (rise and fall of an economy). The cycle is now in favor of the peso. The increasing number of overseas Filipino workers and their remittances helps a lot in pushing the value of the peso upwards.
Also, the global liquidity of Asian countries improved the peso. Another reason for the peso's strength is the country's resources. Due to the availability of land and size of manpower in the Philippines, many economic zones were established opening their doors to potential investors. If the Philippine economy is able to keep this trend, soon the value of its currency will regain its luster towards the foreign trading market.