Exporters told to hedge dollar funds

Before it’s too late, exporters are told to lock up their dollar funds and deposits as the peso is seen to slide further in the next one to two years.

Financial expert Sergio G. Edeza warned exporters recently that in the long term chart, the peso may climb further to the upper ladder even below P40 to the US dollar in two years.

Edeza, who is the former Treasurer of the Philippines, said that the continuous weakening of the US economy, due to balance of trade problem, deficit, and others, would bring about a weaker dollar currency in the future.

Edeza, who is also currently serves as the Treasurer for Rizal Commercial Banking Corporation (RCBC), and president of the Money Market Association, said that that foreign exchange will continue to strengthen, because of many factors, including the huge OFW remittances, the US’ trade deficit.

“This is not trying to scare you, but I am telling the realities,” Edeza told members of the PhilExport-Cebu.

He recommended a dollar fund lock up hedging which is a strategy used to offset investment risk. A perfect hedge is one eliminating the possibility of future gain or loss.

For exporters who are earning dollars, Edeza suggested that they also have to borrow in dollars, as dollar revenues will increase due to technical corrections and the on-set of the importation season.

“It’s better to hedge now while the peso is still in the mid P40 to a dollar. Don’t rely on the possibility that the peso currency will go. It’s better and wiser to act now,” Edeza told exporters.

“The dollar will remain generally weak due to trade deficit problem in the US,” Edeza stressed.

Edeza reminded exporters also that this year—2007 is the10th year anniversary of the 1997 regional economic crisis. Although exporters are already shouting for help, he said “it’s not yet the end of the world.”

He added that there are solutions, that exporters can protect themselves from being paralyzed due to the strong peso, and the different products offered by banks through hedging are one of their protections.

Edeza, was in Cebu recently, to brief exporters on foreign exchange hedging, while exporters are on the “bloody” situation because of increase losses in the foreign exchange.

“In hedging you don’t take a speculative position. It’s also better to lock up your contracts,” he further told exporters.

As the US dollar continues to weaken, Philippine peso is also seen to climb more in the next few months, especially that from October to December, these are the remittance months in the country.