Fluctuating Forex

Spybiz reports that the Philippine government has actively been buying US currency in order to prevent the decline of the dollar. This is being done in order to protect the dollar earning exporters who are bound to "lose heavily".

I agree with the article's rebuttal that the falling value of the US dollar will result to lower commodity prices, since a big number of household products in the country are imported.

It is not very wise for manufacturers to pay for raw materials "at sight". Besides, most regular importers pay their suppliers at a future date, normally, after having converted the raw materials into finished products. Therefore, the importers are not bound to lose that much (if they lose at all) from forex drops, come payment time. The only "crash" will take place on the profit portion of the export price.

Let's give the consumers some breathing space, especially this christmas.

"Let the market Dictate!" - Adam Smith

Related Topics: Fundamental Economics: The value of a currency

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