Drastic Fall For Dollar to Philippine Peso
The dollar to Philippine peso is currently under massive assault. Why? Because the US economy is doing better than expected. The economy in the USA expanded by 2.5% in the third quarter. I sure didn’t see that coming and I don’t think many others did either. The dollar to Philippine peso has abruptly fallen below 43 all the way down to 42.6. The Euro Zone has gotten its act together and Euro stocks are soaring as is are US Stocks. US stocks are on track to have the best month since 1974. The dollar fell against all major currencies and caved against the dollar to Philippine peso. Yeah for the USA?
Well yea, I’m not selfish enough to wish ill will on the USA economy just so that I have few hundred peso or even 10,000 more pesos. I wont send the extra cash back when the dollar is strong but I just cannot gloat over a faltering US economy driving up the value of the dollar.
I’ve written many times about this and now we see it in action. When US stocks are doing well, the dollar generally falls in value. My understanding which I admit isn’t at the expert level is this. When stocks are soaring, investors pull cash out of liquid assets like T-bills and cash. Instead they put them in more risky assets like stocks. Where there is more risk one generally expects higher profits. Stocks are more risky because a company could fail. Regardless of what the S and P and the “profits of doom” tell you, the USA is not going to fail.
This chart shows from XE shows the rapid fall of the dollar at the same time the US stock market soared:
This is the short term effect, I think in the long run a strong US economy helps set a strong US dollar but I’m uncertain of that. It makes sense but not all things in the investment world make sense unless you dig. I remember the first time my finance professor explained how one could make money on the value of falling stock. I’m not going to go into the details but it is called short selling the stock.
Now with the value of the dollar falling the return to an increase in inflation will return. This is mostly due to the possibility that oil prices will rise. Oil prices will likely rise because most oil is sold in US dollars. That means oil produces in the Middle East will see a decline in revenues and to offset they are likely to raise oil prices. This holds true for many other commodities as well.
Currency Trading For the Dollar to Philippine Peso May Be Very Interesting
It has only been a few days so it is impossible to predict next week. Those traders that like to use charts and graphs to predict future stock prices are saying the US stock market has reached a “break out point.” In theory that means this trend is likely to continue. This is called technical analysis and I don’t put much stock in it. It might be useful in the short term but for long term movements the better way to evaluate expectations is to look at fundamentals of why a stock should rise and fall. The companies management, market outlook, balance sheet and income statements are a far better measure in my opinion. Historically, the stock market leads the US economy by nine months. So if the stock market goes up over the years the economy improves about nine months later on average. Its election isn’t it?
It is going to be interesting to watch. It will be a set back for the dollar to Philippine peso currency trading but I am not so sure this will be a long term trend. I don’t think it will be. However, my predictions have not been spot on. As one author wrote, the best indicator of what a currency pairs value may be, the best indication is what it is right now. I look for volatility in the dollar to Philippine peso exchange rate over the coming week, I just hope it is upward volatility.
Filed under: Dollar To Philippine Peso
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