Recent Improvement in the Dollar to Philippine Peso Exchange Rate

The dollar to Philippine peso rate is confusing the heck out of me in the last few days. The dollar has seen a slight increase.  I don’t now what is causing that. It comes at a time when just the opposite would be expected. Perhaps I was too focused on just the increase in interest rates that the Central Bank of the Philippines approved this week. There are other factors that come into play. Let’s talk about some of those factors.

Recent Factors that Influence the Dollar to Philippine Peso

On Thursday, the Central Bank of the Philippines raised overnight interest rates. This increase just after their last meeting which also saw an increased in the overnight interest rate. I expected to see the dollar continue and even steppen its decline in the following days but that has not happen.

The dollar to Philippine rate has climbed back over the P43 mark. It is sad that P43 makes me happy now. It had fallen close to P42 just a few days prior to this. The interest rate increase in the Philippines should have caused a decline in the dollar. However, the interest rate is only one factor that determines this.

The unemployment rate in the USA increased a little in April from 8.8% to 9.0%. Perhaps that is seen as an indication that inflation fears may be further down the road than many expected. Oil prices are up today. Higher oil prices usually mean lower value of the dollar. Yet, the dollar to Philippine peso rate has improved slightly.

Perhaps the Bangko Sentral ng Pilipinas anticipated a sharp decrease in the dollar in the wake of their interest rate increase. Perhaps it moved aggressively to buy dollars to ease the decline. I don’t know, central banks don’t make it publicly known what their positions are in a currency until long afterward, if at all.

Increase in Minimum Wage In The Philippines

The only negative Ive observed for the Philippine peso is that an increase in the minimum wage in the Philippines, specifically in Luzon was increased on Friday. The increase in the minimum wage was only P13.35 per day or about 31 cents per day. Not per hour but day. That likely signals what the rest of the wage boards through the Philippines will do. Each region within the Philippines has its own minimum wage. Luzon has several different minimum wage rates in that province. The minimum wage in the Philippines is controlled by various wage boards. Each province has its own wage board.

Even a small increase in minimum wages tends to increase inflation. The Philippines has already seen higher than expected inflation this year and thus the interest rate increases by the central bank. Perhaps the small increase in minimum wage and the fears of inflation are pushing the value of the peso down.

However, I would have expected investors to have already anticipated the increase in the minimum wage of the Philippines and there is no new bad news on inflation. These factors should have already been factored into the dollar to Philippine peso forex.

However,  the dollar to Philippine peso rate has only been improving for a few days. It is way too early to get excited. I’m a little excited because I thought it would head straight below 40 before we saw any improvement at all. I fear my excitement will soon be replaced with dread as the dollar to Philippine peso returns to its slow painful decline.

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Filed under: Dollar To Philippine Peso

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