Although Floyd Mayweather has topped the Forbes List of the highest-paid athletes in the world in each of the past three years and could take home upwards of $150m (close to £100m) on Saturday night in the most anticipated fight of the century, it is almost inconceivable for the world’s top pound-for-pound fighter to have any discernible effect on the US foreign exchange market, where about $4.5tn is traded each day.
But in the Philippines, which ranks 153rd in the world in GDP per capita and has a purchasing power parity more than 25 times less than that of the United States, it could be argued that its economy is small enough to be affected by a single athlete, albeit a national hero in Manny Pacquiao. Some foreign exchange traders may agree.
In the week leading up to six out of Pacquiao’s last 10 bouts the Philippine peso has appreciated against the US dollar. Heading into five of Pacquiao’s most critical fights, against five common opponents he shares with Mayweather, the peso has gained strength in the final trading session four times versus the dollar as well as four times against the pound. The currency depreciated against the pound only before Pacquiao’s bout against Ricky Hatton nearly six years ago.
When asked whether Pacquiao’s bouts have contributed to an appreciation in the peso, a spokesperson from Bangko Sentral ng Pilipinas, the Central Bank of the Philippines, declined to comment.
Going into Saturday’s Mayweather-Pacquiao fight at the MGM Grand in Las Vegas, a fight expected to be the richest event in the history of boxing, currency fluctuations on the global FX market involving the peso have been modest. The peso stood at 44.206 against the dollar shortly after the boxers signed the fight’s contract in late February. On Tuesday, it was only slightly lower at 44.248.
It is unknown if a single factor such as Pacquiao’s memorabilia sales, high television ratings or even his long-term political aspirations have fuelled the increases in the past. In 2013, Pacquiao ran unopposed for his second term as congressman in the Philippines house of representatives election in the district of Sarangani.
“It’s a very interesting question, I would guess something like demand for sports paraphernalia [could cause a spike], but bets placed might be enough to move the currency if the markets are thin enough,” Menzie Chinn, professor of public affairs and economics at the University of Wisconsin, said.
Few athletes around the world have captivated the pulse of a nation as much as Pacquiao has in the Philippines where he has earned nicknames such as Ang Pambansang Kamao – “The Nation’s Fist” – and Pambansang Ninong – “National Godfather”.
Pacquiao, the first and only eight-division world champion, is routinely swarmed when he arrives at the Ninoy Aquino international airport in Manila and has cleared traffic on the capital’s notoriously congested streets with a host of resplendent ticker-tape parades.
“I saw his level of popularity and the respect and admiration the people had for him, but it was nothing like it is now,” said the Top Rank Boxing representative Ricardo Jimenez, who visited Manila on a pre-fight world tour before a Pacquiao fight against Juan Manuel Márquez. “People are keyed up, I’d say the enthusiasm level is about 10 to 20 times higher.”
Although the Philippines grinds to a virtual standstill each time its national hero enters the ring, the level of Pac-Mania in the days before Saturday’s fight could reach unprecedented heights. Last week the Philippine Postal Corporation rolled out half a million copies of a commemorative Pacquiao stamp for the event along with 30,000 copies of a souvenir poster.
All three major free TV networks in the nation will broadcast the fight, as well as SM Cinema, the nation’s largest theatre chain. SM Lifestyle Entertainment Inc, the company which operates the theatres, began selling tickets for the event late last month. For his efforts Pacquiao is expected to earn between $100m and $120m.
In the event of a Pacquiao defeat recent history indicates it could be some time before the people of the Philippines complete a full recovery. Following each of Pacquiao’s last two losses, against Márquez in December 2012 and Timothy Bradley six months earlier, the peso depreciated slightly against the dollar on the first day FX markets reopened.
The trend draws parallels with a 2007 study in the Journal of Finance which found a strong correlation between a stinging loss by a national football team and a negative monthly return on the nation’s stock market.
Alex Edmans, Diego García and Oyvind Norli, the authors of the study, suggest investors should respond “by shorting futures on both countries’ indices before an important match to exploit the asymmetry of the effect”.
Other figures, though, indicate athletes such as Pacquiao have little impact on market fluctuations even in smaller, emerging nations. In a 12th-round stoppage of Miguel Cotto in November 2009, Pacquiao dominated the Puerto Rican with a flurry of combinations, causing his face to swell and his mouth and nose to bleed profusely . Two days later, the peso depreciated slightly against the dollar. The peso also fell sharply in the week before a 2010 fight with Antonio Margarito even as Pacquiao entered the fight at the AT&T Stadium on a 13-match winning streak.
Paul Stafford, the managing director of Currency Risk Management in London, said foreign exchange investments can be affected by a plethora of macroeconomic forces such as relative interest rates, capital account, central bank mandates and foreign direct investment, as well as speculation from investment banks, sovereign funds, and hedge funds.
Stafford said: “The resulting supply and demand moves the rates in ways that few can predict, and none reliably, so we are not willing or able to make a call on what might happen before or after a specific event such as a Pac-Man fight.”
Last May, Stafford and Stefan Whitwell, a wealth adviser with Covenant in Austin, Texas, co-authored a study entitled Rethinking: Currency Fluctuations & Real Estate, Manila, Philippines for a commercial real estate firm Cushman & Wakefield.
As Pacquiao makes the final preparations to face the undefeated Mayweather, Jimenez said the fighter was focused completely on his training, not on any movements in the peso.
Regardless of the outcome, the legendary boxer has still contributed to his nation in innumerable ways. Since Pacquiao’s breakthrough win over Lehlohonolo Ledwaba nearly 14 years ago, the peso has appreciated against the dollar by more than 15%.
