War is looming. And like it or not, the Philippines is not spared. The
Economist, which incidentally is pro-war, believes that the country
will suffer heavily once the full-blown war in Iraq erupts.
Not surprisingly, the exchange rate has become volatile, with the peso vis-a-vis the dollar reaching a two-year low. The Philippine currency is not at all overvalued, if we consider the surprisingly sustained low inflation rate. The depreciation is simply an indicator of the investors’ nervousness amidst the imminent war in Iraq.