Philippine peso drops against dirham on oil tax

DUBAI — The Philippine peso yesterday dropped against the dirham and the US dollar on profit-taking and after a public address by President Gloria Macapagal-Arroyo, who stood pat on the hugely unpopular value-added tax (VAT) on oil.

By Jose Franco

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Published: Thu 31 Jul 2008, 12:55 AM

Last updated: Sun 5 Apr 2015, 1:00 PM

The peso depreciated to 44.05 against the greenback, or 11.97 to the dirham, from its biggest rise this month of 43.70 and 11.875 respectively on Monday when Arroyo delivered her eighth State of the Nation Address (SONA) before Congress that had been widely criticised across the country.

"The people got angry at her for her refusal to scrap the VAT, prompting the peso to fall against the dollar," said Cielito Gatapia, the assistant manager at Al Fardan Exchange, in Bur Dubai.

On Friday the peso rallied to 43.75 against the dollar, or 11.89 to the dirham, recovering from its Thursday's fall to 43.90 and 11.93 respectively, on favourable oil price prospects but profit-taking pulled back the peso until yesterday. Last Wednesday the peso rose to 43.90 against the greenback, or 11.93 to the dirham, its third-biggest rise this month.

Analysts in Manila were reported to have said that the foreign exchange market would be dictated by the movement in oil prices, not by Arroyo's SONA, for the rest of the week. Sebastien Barbe, a senior economist and strategist at the French investment bank Calyon, in Hong Kong, said oil prices would likely ease to $100 a barrel by end-2008 and to $90 by mid-2009. also reported Barbe as saying that the peso would depreciate to 48 to the dollar between July and September but rebound to 41 by the end of next year.

Overseas Filipino workers (OFWs), consumer organisations, militants, churchgoers and some lawmakers want the 12 per cent VAT scrapped as it has become a burden to poor Filipinos while businessmen call for its retention to keep the economy in shape through more public revenues.

Most of the more than eight million OFWs worldwide send fixed amounts of money to their families every month, plus some extra amounts during the Christmas season and special occasions. For the 450,000 OFWs in the UAE, a weak peso means shelling out a lesser amount of dirhams for their monthly remittances, although high prices back home erode the purchasing power of their families.

The dirham is pegged at 3.67 to the dollar, or 3.68 at the exchange bureaux. The money sent home by migrant workers is first converted into the greenback by the remittance centres and then into the peso by the receiving banks with corresponding "front-end" and "back-end" fees.

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