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The Philippine peso will likely appreciate to 37.50:$1 this year and to 35.50:$1 next year as the Bangko Sentral ng Pilipinas (BSP) is seen to support a stronger currency to cushion rising inflation, Hongkong and Shanghai Banking Corp. (HSBC) said Wednesday.

HSBC managing director Frederic Neumann told reporters that the central bank will possibly allow the peso to appreciate further in the next two years to ease the impact of inflation due to rising prices of oil and food.

For this year, the peso is expected to appreciate steadily at 40.50:$1 in the first quarter, 39.50:$1 in the second quarter, 38.50:$1 in the third quarter, and 37.50:$1 in the fourth quarter, according to the British banking giant.

But when asked in an ambush interview, Wick Veloso — treasurer at HSBC Holdings Plc in Manila — personally believes that while the peso was bound to strengthen, the more realistic rate was around 41:$1 by the end of the year.

Veloso said the projection of the HSBC's economic research team in Asia was a "very aggressive projection." His view is closer to an earlier forecast released by US-based investment bank Goldman Sachs Group Inc., whose economists believe that the peso upside was limited to around 41:$1.

The country's macroeconomic foundation supports the bullish forecast growth of the peso over the near term, Neumann said. "Growth is expected to be strong. The exchange rate should reflect it."

Neumann said the domestic economy is seen to grow by at least 5 percent this year and strengthen further to 5.8 percent next year due to accelerating private consumption and government spending and investments.

He also said that since the Philippine economy is rapidly expanding, inflation — or the rate of change in prices — is expected to climb to 4.4 percent this year and to 4.8 percent next year, from 3.8 percent last year.

The BSP has said the country's inflation will likely average at 4.4 percent this year and 3.5 percent in the next.

Neumann pointed out that the Bangko Sentral was the only central bank in the region that has kept its policy rates steady when everyone in the region has acted preemptively against rising price pressures.

The Monetary Board has placed the overnight borrowing and lending rates at 4 and 6 percent, respectively, since July 2009.

Neumann is worried should the BSP keep its interest rates at record lows: "Unless interest rates go up, there will be a danger of inflation," he said.

Neumann said the Philippines should increase its interest rates since "the Philippines has stood out in the region" for not having raised its key rates.

The HSBC official also said the remittances of overseas Filipinos and the projected surplus in the balance of payments all point to a stronger peso. — JE/OMG, GMA News

Do you know that there are existing regulations that are meant to provide for credit card debt collection methods that are reasonable and legally permissible?

Do you know that credit card issuers and their collection agents should observe good faith and refrain from engaging in unscrupulous or untoward acts, to the extent of harassing and humiliating
the credit card holder?

For the information of the public, existing Bangko Sentral ng Pilipinas regulations prohibit credit card issuers and their collection agents from engaging in the following instances of unfair collection practices:

• The use or threat of violence or other criminal means to harm the physical person, reputation, or property of any person;

• The use of obscenities, insults, or profane language which amount to a criminal act or offense under applicable laws;

• Disclosure of the names of credit cardholders who allegedly refuse to pay debts;

• Threat to take any action that cannot legally be taken;

• Communicating or threat to communicate to any person credit information which is known to be false, including failure to communicate that a debt is being disputed;

• Any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a cardholder; and

• Making contact at unreasonable/inconvenient times or hours which shall be defined as contact before 6:00 A.M. or after 10:00 P.M., unless the account is past due for more than sixty (60) days or the cardholder has given express permission or said times are the only reasonable or convenient opportunities for contact.

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The Year of the Metal Rabbit according to Chinese “feng shui” experts is a prosperous year for people who will venture in business or investment related to metal. Bullion coins and pieces of jewelry are perhaps the most accessible tangible investment for everyone.

Although Gold is down 6% and silver 12% since the start of 2011 as this is the sharpest decline in precious metals since June of last year and with technical support broken at the 50-day moving averages, many are concerned of a deeper correction ahead.

Corrections are a healthy and normal part of any secular bull market, allowing the bull to rest its legs, shake out weak hands and prepare for the next phase up. Every correction in precious metals over the past decade has brought so-called “experts” out of the woodwork to proclaim an end to the gold bull market. They were wrong when gold hit $500, $800, $1,000 and will be wrong many times again before gold finally does peak somewhere above $5,000 per ounce.

Even though, bracelet charms and simulated piles of cash coins are hot commodities for local fortune seekers bargain hunting in the streets of Binondo. Mainland Chinese however are more bullish on hunting for bargain silver and gold bullion coins.

While the paper market has been driving the spot price lower, the physical market appears to be as robust as ever. Sales of silver eagle coins for the month of January have already set a new all-time record, with ten days still left in the month. Furthermore, silver demand in China has quadrupled versus last year, as the emerging Chinese middle class looks for a hedge against inflation and the Chinese government encourages its citizens to buy gold and silver.

This is a relatively new phenomenon in Chinese culture, as ownership of precious metals was illegal just a few short years back. But this has all changed as China has become the largest producer of gold in the world and is expected to surpass India as the largest consumer of gold as well.

Demand from China is not only coming from the citizens though, as the Chinese government has been accumulating massive amounts of gold and silver for their reserves. After not reporting gold reserves for six years, the Chinese government in 2009 made a surprise announcement that they had nearly doubled their gold reserves to over 1,000 tons. They have been doing this quietly via buying up the production from Chinese mining companies, as well as making purchases in the open market via intermediaries.

China announced annual gold production of 314 tons in 2010 and this number is expected to be around 320 tons in 2011. If the suspicion that China is buying up most of the country’s gold production is true, there could well be another 600 tons or more moved into ‘unofficial’ reserves before the next announcement. Add in purchases in the international market, and it is conceivable that China’s reserves could effectively be doubled again by the end of 2011 to some 2,000 tons.