There has been a lot of news lately about the US Dollar to Philippine peso currency exchange. As usual, the currency pair been trading all over the place. A couple of weeks ago the dollar was pushing upon P44. Then it was down in the upper P42 area again. Here is a chart from XE showing the movement for the US dollar to Philippine peso over the last month.
Bumpy Ride for the US Dollar to Philippine Peso
There have been quite a few factors effecting the US dollar to Philippine peso exchange rate recently. The Euro Zone continues to be the biggest influence. Recently central banks in many parts of the world moved to make it cheaper to borrow short term dollars. Investors reacted to this buy putting their money back into stocks, especially in the Euro Zone.
That seems incredibly short sighted to me. Steps like this are taken when a currency is in trouble. Its not the dollar that is in trouble though, dollars are not flowing in the Euro Zone. A few months before the banking collapse in the USA, the central bank in the USA lowered the reserve requirement by a factor of four to get money moving. That was a signal to me that problems were not far a way. When those problems surfaced, they have lingered for the last three years and it looks like we have another year or two before things get better. This move by the banks indicates to me that there are major problems and it could get worse.
China also lowered its reserve requirement about the same time. This too was seen as good news by many investors. It made little sense to me for China to do this. China’s banks are feared to be over extended if there is an economic slowdown in China. There will be a slow down and we have already started to see it. To me, it is a desperate move by China to keep growth up.
As most will know, the unemployment rate in the USA took a dramatic move for the better. There has been a lot to downplay the significance of this. I think the analysis on that has been flawed. The two main points are that the number improved in large part because of the people dropping out of the workforce and seasonal employment. Those issues need to be considered but I’ve seen no one compare that to the past. Did more people drop out last month than in previous months? What happened last year, was there a huge drop last year that soon evaporated after Christmas? Since this is the lowest rate in two years, those factors should already be included in the improved rate.
The drop in the unemployment rate is significant no matter how much Republicans wish to downplay it. Another good sign is that spending records are being broken during this Christmas season in the USA. That is a sign that Americans are feeling good about their jobs.
Does this mean the US economy has turned around? No, it doesn’t but things do seem to be slowly improving. That’s good news for American but not such great news for expats. As the economy improves investors will put more money in stocks and less money in liquid assets. That means cash will flow, pushing the supply up and the value of the dollar down. However, that’s the short term effect. In the long term, a strong economy makes a currency worth more. I could use some short term improvement in the dollar now though.
S&P’s announcement that they were considering a downgrade of all counties within the Euro Zone credit rating sent the dollar back up. Six countries in the Euro Zone have the highest rating of AAA. Those countries are all on the chopping block. If S&P does cut the rating, that will send investors back to investing in the dollar. Because to investors, despite the dollars lowered credit rating it is still the safest, least risky place to put your money. This too though will be a short term reaction.
US Dollar to Philippine Peso Rising On Philippine Data
The dollar has been doing better against the Philippine peso currency trade recently than it has against other currencies. Yesterday I read that the Philippines had an increase in inflation and a slowdown in growth. The growth slowdown is likely to be a result of China’s and the Euro Zone’s slower growth.
In the immediate future, the big news is the Euro Zone summit this week. If there is big news coming out of that meeting then the value of the currencies will be affected. If the news is more bickering, the dollar will rise. If they manage to find some way to improve the stability of the Euro the dollar’s value will fall. My guess is that they will come up with some kind of big plan to save the Euro. The news will excite investors for a few days, then the plans will fall apart. This seems to be what has been going on for some time now. I think it is a desperate move by politicians in Europe to breath some life back into the economy no matter how short term or misleading the big news is.
Though the recovery in the USA is slow, there really does seem to be a recovery in process. If you’re one of the millions without work it may not feel that way to you and with good reason. These are troubled financial times. However, the USA is in a much better place financially than it was three years ago. Then things were getting worse, much worse. The dollar was doing great as a result. Without TARP, it would have done even better. Then came quantitative easing which was devastating to the value of the dollar. The US dollar to Philippine peso took a major dive during that period. Since QE2 came to an end in July the dollar has been moving upward.
In my last article about the US dollar to Philippine peso rate of exchange, I mentioned how fast things could change. I also mentioned that government action is one of the major factors. Soon after, the central banks around the world made a move to illustrate that. I thought, great, just when I thought things would get better the governments step in to wreck the US dollar to Philippine peso currency trade. This is one of the things that make forex trading such a high stress form of investing. Overall, things still look good for the dollar. Hopefully, the US dollar to Philippine peso exchange rate will continue to move to favor the dollar.
Filed under: Dollar To Philippine Peso
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