Appears in my No Nonsense Column at the Moneysense Magazine, March-April 2011 issue.

————–

As I write this column, the official exchange rate is Php 43.45 : US$ 1. A lot of people are really anxious as to the direction of the once mighty global currency standard. If my memory serves me right, I believe the US Dollar peaked at about PhP 55 : US$1 not too long ago. At a certain point period of time, the annual average depreciation of the Philippine Peso against the U.S. Dollar was pegged at about 7 to 8% per year. About 5 years or so, many Filipinos were still converting their money into US Dollars in an attempt to secure the value of their monies and even experience capital growth.

From its peak, the once mighty green bucks have significantly loss a lot of its value as against many currencies, including our once feeble Philippine Peso – by as much as one fourth, or 25%. If you consider inflation, the impact of the appreciation of the Philippine Peso has greatly eroded one’s portfolio had it been primarily invested in US Dollars.

The big question is, what should you do with US Dollars? If you have them, do you sell them? If you don’t have, do you buy? That’s a tough question to answer. Fortunately, there are some great insights posted at my website (www.randelltiongson.com) when I asked the readers of my blog on the options for the US Dollar. Here are some tidbits:

It depends on your objective. If you plan to retire in the US, then you should start accumulating at these “cheap” levels. If you plan on staying here, why bother with FX volatility. I wouldn’t buy it right now as a means of investment or speculation of it appreciating again (I already got out while it was Ps47). – Rich (unknown respondent)

“I find myself buying more of this currency now for travel funds. My thought is we can’t rule out the dollar just yet after all its still an international currency. But is it a wise investment on my part?” – Roy A. (Printing Business)

“If you have lots of it then keep it. No use selling it now since it already lost 10% of its value. Buy more dollars next year. Eventually it will go up once peso starts going down. Just be sure you are diversified. Just my opinion. (P.S. buti konti lang dollars ko! haha)” – Raymond (Hardware Business)

“Dump my USD before the year ends as the seasonal spikes in the Peso occurs. Then, when it starts to weaken, accumulate again.” – Raffy Pekson II (Corporate Executive)

“I think the dollar will never recover if quantitative easing in the U.S. will continue. With this scenario, I’d rather sell my dollars as soon as I get them. And split it into gold and peso. If a double dip recession comes true, the dollar will further lose value. Gold will appreciate and I would have the option to repurchase dollars with pesos to invest in good US blue chips like Google and Apple in anticipation of the eventual recovery from double dip recession.” Hilbert Cardenas (OFW)

“What to do with dollars? Well, I just burn them. They take up too much space.” Rafael Azanza (Management Professor)

There you go. Such varied suggestions but there are so much insight into such advices. There are a couple more comments in the said blog entry (https://www.randelltiongson.com/what-to-do-with-your-us-dollars/) and all are interesting to read.

The conclusion? Well, you really must consider the purpose of your investment first and foremost, your time frame for the investment as well as your risk tolerance. US Dollar, like any other investment, is an asset class. All asset classes have their purpose and particular contribution to any diversified portfolio. Remember, always practice prudence in anything – investing or otherwise.

The Philippine Stock Market Index nearing is 4,400 while our the Philippine Peso exchange rate against the US Dollar is about to breach the P41 mark. In the next few days, this scenario might be realized if we follow the trend.

The bullish market is buoyed by good prospects for Philippine corporations and a bullish environment preceded such a sentiment. The market is reflected by sentiments, in reality.

The weakening US Dollar has also resulted to a strengthening Philippine Peso and a 40 to 41 rate by year end may actually be realized. The appreciation of the Peso will definitely have an impact on the huge OFW remittances as well as the exporters segment – both critical components of our economy.

On the other hand, it seems that the Oil prices are rising which will have inflationary impact (rising of prices). The good news is, a stronger Peso will somewhat cushion the rise in oil prices and in a way, help ease inflationary pressures.

My 2 cents.