FOREIGN EXCHANGE RATE IN THE PHILIPPINES

Economists know that poorly managed exchange rate can have a negative effect in economic growth
(Rodrik, 2008). Exchange rate is determined by the demand and supply for foreign exchange from the
households, firms, and financial institutions that buy and sell foreign currencies to make international
payments. Since the value of real exchange rate is important especially in the international trade and in
determining the competitiveness of a country, it should be important to maintain its equilibrium rate to
create effective policies especially in a developing country.

In the Philippines, exchange rates can be viewed in different ways. The most common view is the
Philippines peso – US dollar exchange rate since the US dollars is the most important currency in the
world and United States also has the biggest share of the Philippine international transactions. Another
one is the Japanese Yen since it is the second most important contributor in the Philippines foreign
international trade. In the last decade Japan accounted for about one-fourth of the country’s
merchandise trade. The total share of other trade partners was slightly above 40 percent, each of which
contributed less than 10 percent. Another view is the Real Exchange Rate or the Real Effective
Exchange Rate (REER) that plays an important role in the outward-oriented development strategy that
the Philippines have apparently followed since the early 1970s. Real Effective Exchange Rate (REER) is
a key macroeconomic relative price influencing the composition of production and absorption between
tradable and non-tradable goods. Relative production incentives, including the incentive structure for
export producers, are affected directly by the REER.

Foreign Exchange Rate

Currency Buy Sell

USD 53.45 54.15
GBP 61.98 66.66
AUD 35.88 38.92
NZD 32.22 35.64
CAD 38.08 40.89
CHF 55.52 60.42
JPY 0.3948 0.4298
HKD 6.47 6.95
SGD 38.71 41.62
SAR 11.51 14.52
BHD 134.74 144.54
DKK – 7.98
SEK – 5.25
BND 38.74 42.04
IDR 0.0030 0.0042
THB 1.5219 1.6509
TWD 1.6922 1.8327
EUR 55.28 60.28
CNY 7.39 8.08
KRW 0.0428 0.0552

SELLING BUYING
L/C 54.150 Withdrawal/TT/Drafts Drawn on PNB 53.550
Demand Drafts & T/C 54.150 Export Bills 53.450
US Dollar Notes 54.150 US Notes 53.450
Telegraphic Transfer 54.150 Drafts/Checks drawn on US Banks 52.950
Credit Card Rate 54.350 Drafts/Checks drawn on non-US Banks 52.700
US Treasury Warrant 52.700

Foreign Currency in US$ TERMS

CURRENCY BUYING SELLING
GBP 1.2113 1.2311
AUD 0.6981 0.7187
NZD 0.6327 0.6581
CAD 0.7403 0.7552
CHF 1.0788 1.1159
JPY 0.007607 0.007937
HKD 0.1267 0.1283
SGD 0.7586 0.7686
SAR 0.2408 0.2682
BHD 2.6355 2.6692
DKK 0.1455 0.1474
SEK 0.0957 0.0969
BND 0.7493 0.7764
IDR 0.000051 0.000077
THB 0.0301 0.0305
TWD 0.0316 0.0338
EUR 1.0762 1.1132
CNY 0.1380 0.1493
KRW 0.0008 0.0010

Of course, there are a lot of things that affect foreign exchange rate in the Philippines, one of those is
tourism. Since it is accepted that tourism brings considerable revenue to countries and that it is a way of
economic development, it is necessary to analyze the factors affecting the tourism industry. Because of the
pandemic, transportation industry are also affected. The largest association of international carriers has
warned that airlines may be forced to lower flight volumes should foreign exchange losses mount, a
scenario that could halt the recovery of travel and tourism worldwide. However, domestic carriers told the
media they would keep on reinstating pre-pandemic routes and introduce new links to increase aircraft
utilization and spread their fixed costs. The International Air Transport Association (IATA) estimates that the
aviation industry stands to lose at least $1.9 billion in funds due to currency depreciation in the forex
turmoil.
Budget carrier Cebu Pacific is also reeling from the impact of a depreciating peso, especially as up to 70
percent of its expenses are denominated in US dollar. In its financial statement, Cebu Pacific operator
Cebu Air Inc. reported that its forex losses have more than doubled to P3.86 billion as of September from
P1.83 billion a year ago, reflecting the severity of the impact of the peso’s decline to airline operations.
In particular, Cebu Air said the peso was trading at 58.63 to $1 at the end of the year when it was hovering
at just 51 at the start of 2022 last year. As such, the Gokongwei-led airline surrendered all hopes of turning
in profit this year, with its net loss at P12.05 billion as of the third quarter.
Contrary to IATA, Cebu Pacific said that it counters the impact of forex fluctuations by scaling up its flight
frequency to bring down fixed costs. In the process, the budget carrier raises its aircraft utilization, trims the
price per seat and, at the end of it, lower airfare for passengers. “A weak peso may result into higher forex
losses and increased liabilities since 60 to 70 percent of our expenses are denominated in the dollar .As we
increase flights, this brings cost per seat lower as we spread fixed costs – both peso and dollar-
denominated costs – across seats. Every time we fly, our costs are spread. This ensures affordable airfares
for passengers.” Cebu Pacific

CEBU AIR PACIFIC: WAY TO IMPORT AND EXPORT

Cebu Air Inc (Cebu Pacific), a subsidiary of JG Summit Holdings Inc., is an airline travel service provider.
The company operates under the trade name, Cebu Pacific Air (Cebu Pacific). It provides scheduled air
travel services and cargo services. The company’s fleet includes Airbus A320CEO, Airbus A330CEO,
Airbus A320Neo, ATR 72-600, ATR Freighter, and ATR 72-500. Cebu Pacific, through its partners, provide
tours, hotel booking services, cruises, and car booking services. The company also provides sports
equipment handling, car rental and travel insurance services. Cebu Pacific operates flights to cities in
several other countries across Asia-Pacific, the Middle East, and the US. The company is headquartered in
Pasay City, Philippines.
Cebu Pacific (5J) will charge 200 PHP per kilogram per bag for domestic flights and short haul international
flights; 800 PHP per kilogram for long haul international flights beyond the Prepaid Baggage charge.