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Forex and Remittances Timing
I am currently assigned on a quick research project with regard to the timing of foreign remittances in the Philippines. My boss wants me to determine whether Filipino workers abroad remit at the opportune time (i.e. a depreciated peso). I would like to ask for your perspective on the matter.
(edited)
Question:
1. Do Filipinos remit more money when the peso depreciates?
2. Or do they remit more money when it appreciates?
Your thoughts?
Thank you.
(edited)
Question:
1. Do Filipinos remit more money when the peso depreciates?
2. Or do they remit more money when it appreciates?
Your thoughts?
Thank you.
Views: 30
Replies to This Discussion
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Permalink Reply by A Rai on -
No one can predict the currency market friend. However, if the inflation and interest is significantly higher in Philippine than that prevailing in US then, in the long run, a Filipino may be benefited by delaying the remittance as much as possible in terms are exchange rate in concerned.
My personal opinion is to get these foreign currency in your country as early as possible, negotiate the best possible exchange rate (if possible) and place them in cash deposit (or fixed deposit) with a the good banks in your country.
The amount of the Fixed Deposit should be judicially splitting in appropriate denomination. No one has any control over exchange rates, however, bank rates don't fluctuate as fast and once committed banks generally has to honor.
This helps us to plan things better as you have settled the certainty and the cash flow is definite.
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Permalink Reply by Fuzail Zubaid Ahmad on -
Mr. A Rai, this is NOT what he asked, i am afraid.
Thanks and regards
Fuzail
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Permalink Reply by Maria Nerissa Cochingco on
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I am wondering about the interest in Filipino workers' remittances? Is it bec of the effects on Phil economy? high $$$$ reserve?
If we are talking of OFW (Overseas Filipino Workers) one has to consider why there are lots of Filipino migrant workers, survival! so remittances are converted at whatever is the exchange rate on the day they arrived! either through banks or other means/forms. Since most OFWs are sending on a regular basis, yes the inflow is stable. but, as to REAL WAIT GAME, no it does not apply to our relatives there. few would have saved also in fx currency. few would have finance skills, we are workers (poor) not investors!
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Permalink Reply by Theodore W. Valderrama on -
The reasons you have specified partly explain my interest in OFW remittances. But my study is more about determining "behavioral patterns" - that is to say, do they send more when the peso "depreciates" or when the peso "appreciates"?
Also, your perspective on the topic is very helpful, as their remittances do indeed follow a "need-based" seasonal trend.
Thank you.
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Permalink Reply by Nilo G. Simogan on -
As an Overseas Filipino Worker (OFW) in Qatar, on one hand I would say that sending remittances to my family does not depend on the exchange rate on that particular day. It depends greatly on the pressing need to send money to them because my remittance is their bread and butter, whether the economy is good or not, or the exchange rate is high or low. Our timely remittance is very crucial for their survival.
On the other hand, the high exchange rate gives us the "moral booster" because it means that our "sweat and blood" has more power to the financial needs of our loved ones. A difference of hundred of pesos to our remittance means a lot to us as sender and bread winner. It means additional kilos of rice or anything. Sometimes we do speculate that the exchange rate would increase for a day or two. Longer than that is inexcusable to our family.
Hope my opinion would serve your purpose.
Mabuhay!
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Permalink Reply by Theodore W. Valderrama on
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Thank you very much, Mr. Nilo! Historical data has its limits, and your reply gave me a better understanding of the psychology of Filipinos abroad.
But if I may ask, do you remit more money when the peso 'appreciates'?
-because let's say your family has monthly fixed expenses of Php100,000 in the Philippines. If the peso exchange rate used to be Php50/1USD (meaning you only had to remit $2000 a month) and it appreciated to $45, does that compel you to remit more? [to compensate for the loss of value of $2000]
Once again, thank you!
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Permalink Reply by Hermelo Y. Parot on
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Basically we have three kinds of remitters. An insignificant few of those who remit regularly may wait two or three days if they see a significant trend in the depreciation of the peso. For those who remit because of an immediate need (hospitalization, tuition payment, etc.), the rate would not matter. Even fewer (but probably higher in amount) would take advantage of a higher rate to make good on a plan to renovate a house, invest, etc.
i was involved in the remittance business in honolulu for some time. hope this helps.
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Permalink Reply by Theodore W. Valderrama on
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Thank you very much! Your experience in the remittance business, especially overseas helped clarify the behavior of OFWs with regard to remittances.
Historical data would validate your statement that "remitters send more money in times of need" (tuition, graduation, pre-Christmas, and Christmas spikes), but it really helps to hear first-hand information on the matter.
Thank you!
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Permalink Reply by Louie A. Claudio on -
Your opinion maybe partly true, however, historically volume of Filipino remittances is high during school tuition periods, Christmas holidays, etc. or the timing of financial need.
I suggest that you conclude base on historical data which can be sourced from lots of information providers such as BSP (Bangko Sentral ng Pilipinas), PDex (Phil Dealing System), Bloomberg, Reuters, etc.
Historical data will tell you everything!
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Permalink Reply by Theodore W. Valderrama on
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Hello,
Historical data will indeed validate the seasonal trends you mentioned above as remittances tend to spike during Christmas, April, tuition payment periods, etc.,
However, the study I'm supposed to make is about determining whether Filipinos abroad send more money when the peso appreciates or when it depreciates.
I did a simple correlation study on the matter, and also comparing charts and the numbers (although not on a consistent basis) support the "assumption" that OFWs remit more money when the peso appreciates.
-The only reason I can think of is that an appreciation of the peso would "supposedly" compel OFWs to remit more money to compensate for the "loss" of value due to foreign exchange.
-in other words, if say, a typical family of an ofw in the Philippines has an average monthly expense of P50k, and the conversion rate was P50/$1USD, then the OFW would only have to remit $1,000. However, if the peso suddenly appreciated to P25/$1USD then OFWs would have to send $2000 to cover their families' expenses.
Your thoughts?
Thank you
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Permalink Reply by Unni on
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Most Filippina inward remittances from abroad are in pesos and sender enjoys the freedom of converting when & at what rate. Dollar remittances are much less and hence the question of relatives exchanging for the local currency doesnt arise. At the macro level (for a country as a whole) inward emigrant remittances over a period of time are steady unless the size of emigrant population varies significantly for reasons of recession or government policies.
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Permalink Reply by Besong Joseph on
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Well, Theodore, the issue of remittances and FOREX is an interesting one. Many empirical papers have been presented on this issue for the Philippines. I think one of the major difficulties we face is that we have data on for yearly intervals (World Development Indicators). The remittances Forex nexus is a positive one. So, one may agree that Filipinos remit most when exchange rates decline. But there is something also interesting about remittances in the Philippines: when the economy is in decline or in times of financial crises, Filipinos remit more. It appears they remit at such times to support families in real financial distress. As for your argument about remitted dollars causing an appreciation of the peso, a kind of dutch disease problem, I think you would have to examine the exact causes of the fall in FOREX rates. I hope you find something in this to expand your research. Good luck!
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