Dollar Trading Finally Over The 43 Barrier

It has been a while since we saw the dollar trading above 43 to the US dollar but it closed at 43.6499 yesterday! That is according to XE which is where most expats living in the Philippines turn to get an accurate rate. The rate at Bangko Sentral ng Pilipinas is usually a little lower. That’s likely the peso exchange rate at which the banks trade.  When I use my American debit card, I usually get right at the XE rate but the fees demolish that.

What will the rate be next week? I have no idea. I would guess that there will be some profit taking at some point. That will likely lower the value of the dollar.

US Dollar Trading Improves Except for the disaster created by the debt ceiling politics the movement of the dollar has been mostly positive over the last six months or so. I’m not getting my hopes up though as I don’t expect to see 44 to 1 for the dollar to Philippine peso exchange rate any time soon.

The dollar would be in worse shape if not for our good friends the Greeks. They seem bound and determined to wreak havoc on the Euro. While this is great news for American expats we shouldn’t get to giddy. It doesn’t bode well for many Filipino. Those that depend on overseas Filipino workers benefit but those that depend on exports to Europe could suffer.

On the other hand, the Philippines has been trying to slow growth and this could help with that. Which usually helps inflation. A lower inflation rate is of course good for both Filipino and expats living in the Philippines.

My electric bill for July usage was P10,200! That’s the first time it breached P10,000. When we first moved into this home it was around P6900. A double whammy for American expats with the value of the dollar low and the cost of electricity rising around 25% if I remember the press reports correctly. It appears that the previous administration in the Philippines artificially held prices down though and that is more of a factor in the increase that inflationary pressures. Of course the price increase is inflationary in itself.

Dollar Trading Has Been Flat

I haven’t written about how the dollar is trading in the Philippines lately because there wasn’t much to say. It bounced around 42.5 ever since the central bank of the Philippines rescued it after the ridiculous downgrade by S and P. Why do I say ridiculous?

I say it because where do investors turn to when there is trouble in the world economy? They turn to the US dollar. Even with its troubles the dollar is still the most stable currency in the world. If the dollar fails everything fails. When investors are fearful, they turn to the dollar.

Those that are into dollar trading on a regular basis call it “risk aversion.” Those must be the most over used words when it comes to talking about FOREX and investing in general.

The long term strength of the dollar was best shown in what happened when S and P took that insane, unwarranted action. The downgrade caused a high degree of economic uncertainly in the short term markets. So how did investors react? They borrowed money from the United States Government!

S and P took that action to try to regain some credibility. It should make them a laughing stock.

The dollar will rise again and it may even do it faster than I have come to expect. The years of 2008 to 2010 saw dollar trading below 40 to higher than P50 to 1 USD.

Sometimes people think that the dollar trading at 45 to 1 means  your American money will go 45 times further in the Philippines. That couldn’t be further from the truth. I certainly wish it was true. I’d say 2 to 3 time further with it being mush closer to 2 times further.  That depends on your needs. It also depends on how much cash you have. For most of us that live on a pension that means we must cut back.

Your housing dollar will go about 2 to 3 times further. Maybe even higher than that. Now you’re electricity dollar will not but the cost of housing, especially rent will. Services are also cost very little in the Philippines. A trip to the dermatologist resulted in a doctor bill of about $2.50. Can you imagine that in the USA? I can’t. It cost more than that for a trip to a country doctor in Clinton Mississippi in the 70’s! It cost five times that.  The dollar trading at P40 to 1 will make your money go further in some areas but not in all. In other areas it could cost you more. Don’t let anyone tell you it cost more to live in the Philippines. For those that is true for it is because they choose for it to cost more. It would require a lot of effort on my part to make that true, I’d go broke before I could get there.

I am of course happy to see the dollar above 43 again. I’ve learned my lesson about thinking that short term rises, especially sharp ones like this is a signal of great things to come though. Investors or fickle and none are as fickle as Forex traders. Dollar trading could be at 41 next week and I would not be surprised. I don’t think dollar trading will be that low but if it happened it would only sadden me, not surprise me.

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Filed under: Dollar To Philippine Peso

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