The mindset of the Filipinos has always been to hoard US dollars. People have always bought dollars whenever they have spare change. Who can blame them? As far as the older generation can remember, the peso has always lost value against the dollar. The aftermath of the 1997 Asian financial crisis also reinforced Filipinos’ preference for US dollars. Because of the sharp devaluation of peso during the crisis, many sought the refuge of the US dollar as a reliable store of value.

In recent years however, the dollar’s role as the major currency reserve has deteriorated. After accounting for more than 70 percent of the world’s currency reserves in 2000, the US dollar now accounts for only 61 percent. Meanwhile, the peso has appreciated more than 25 percent from its all-time low against the US dollar. Thus, this previous position of holding dollars against pesos, while still popular among Filipinos, is now slowly changing.

Back in the 1970s, the exchange rate was as low as Php6.435 vs. US$1. By early 1980s, it has devalued to Php14 vs. US$1 after the Philippines issued a moratorium on its debt payments. By the early 1990s, the peso was relatively steady, trading between 24 and 28 against the greenback. Then, the Asian financial crisis hit the country in 1997, sending the peso to as high as 46.50 by January 1998.

The Asian financial crisis accelerated the deterioration of the country’s fiscal position. By 2003, the national government debt had reached 77% of GDP, while the consolidated public sector debt had worsened to 137% of GDP. A year later, the Arroyo government would declare that the country was in a fiscal crisis and the peso hit its lowest point against the greenback at 56.50.

Current, 1USD=42.19PHP at exchange. The Peso target at 40 is now not impossible for 2012, base from the other currency traders. In Gods will. Angat Pinoy.
(source: PhilStock, WealthSec, Yahoo Finance)