Philippine 1st Quarter Forex In Windfall

"The Philippines’ balance of payments yielded a surplus of $98 million in March 2005 on strong inflows from exports, portfolio investments, and workers’ remittances," reported inq7.net, the online edition of the Philippine Daily Inquirer that’s co-branded with GMA 7 Broadcasting network, two of the Philippines major media companies.

Sourced from the country’s central bank data, the balance of payments registered a three-year high surplus of $962 million in February bringing first-quarter foreign exchange windfall to $783 million. Foreign exchange transactions between the Philippines and the rest of the world are measured by the balance of payments (BOP). The BOP increased despite high oil imports and continued debt servicing.

"The strong inflows of portfolio investments since the start of the year, which has led to a sharp appreciation of the Peso against the US Dollar, also gave the Central Bank opportunity to buy Dollars in the spot market," the website’s article (Payments Balance Shows $783-M Surplus In 1st Quarter) summarized.

Forex For Beginners

I admit, I am one of the people who find the foreign exchange (forex) and its market uninteresting. The only time I find forex useful is when I have to pay or be paid for something in a currency not local to my country’s. So now, I am really faced with the challenge of writing something sensible for this blog to help fellow-clueless people like me get a better grip of foreign exchange.

For starters, let’s take a glossary check on foreign exchange. The Federal Reserve Bank of New York (FRBNY) defines an exchange rate as the price of one foreign currency in terms of another currency. Google Search engine results for its definition range from acronyms for foreign exchange market, long-cut for forex, and a cash market where the currencies for many nations are traded via brokers located in various parts of the world. I find the last definition as the most helpful.

This makes the forex market, per se, as place where the majority of the world’s currencies are brought and sold. The forex market could also be defined as a network of financial institutions and brokers in which individuals, businesses, banks, and governments buy and sell the currencies of different countries. Now, that’s the easy part.

The scene changes when the word forex trading comes to play because there are tons of terminology sure to flood it. But in terms of the factors that affect forex trading, FRBNY attributes inflation and economic growth as the primary determinants that affect the play of forex demand and supply.

As to purpose, foreign exchange currencies are traded to finance international trade, invest or do business abroad or speculate on currency price changes. Foreign exchange rates are determinants of a nation’s health—market-wise and financial-wise—and affect the value of a country’s products and financial instruments to a great extent.

Zimbabwe’s ForEx Crisis

Zimbabwe is hitting the floor levels in their economic problems resulting to a crisis in their foreign exchange. Africaonline’s unnamed correspondent writes that the crisis was the result of a series of shortages in the country brought by drought and poor harvest. Shortages involve the most basic of necessities like toothpaste, margarine, grain, and food, except for the country’s staple crop otherwise known as maize.

Another reason for the forex crises, added Africaonline, is the decrease in the production of tobacco that occurred after the seizure of white-owned farms. The country’s land reform program has forced white farmers for the past five years to leave their lands, which affected Zimbabwe’s previous stable food supply.

But despite the country’s state, Zimbabwe’s government refused foreign aide and support since they accuse the UK and other Western countries who opposed their land reform for their current economic crisis. They, in fact, accuse the said countries of economic sabotage.