USD Exchange rate to Improve for American Expats
HSBC is predicting the Philippines Peso will fall to P53 to $1USD. The main reason for this expected decline in the peso is the slow down of remittance caused by the US Economy remaining in recession.
Bangko Sentral ng Pilipinas (BSP) cut interest rates again this week but indicated it would likely be the last cut. But HSBC expects to see further cuts of 25 to .50 basis points. The Philippine government has lowered growth expectations for the year and net investment is showing a deficit. More investment is being made outside of the country than foreign investor providing new capital into the Philippines. Exports from the Philippines have also down in recent weeks
The US economy has reached a staggering 9.4% inflation rate. While the rate of increase in unemployment is down, It still may go over 10%. A number which many use to proclaim that a recession has moved into depression. There are a lot of positive signs in the US economy. The stock market has been rising since about February. Surprising, new housing starts have been up too. Some banks have been deemed stable enough by the Obama Administration to repay TARP funds. They wish to do that so they can pay executives high dollar salaries again.
This is in line with what I’ve been saying for months. The lack of investment by American firms and the loss of jobs will reduce remittance. Remittances from the US have already fallen by 25%. Remittance and high growth from Dubai and other Gulf areas have been able to make up the difference so far but that is likely reached its limit as well.
The bankruptcy of GM, will put more people out of work. GM will be a smaller auto company in the future. There will be a negative impact on the economy. Many jobs will be saved through mergers of part of GM’s operations by spinning off Hummer and Saturn among others. There is usually job loss associated with mergers. However, its certainly better than the branches going out of business completely.
Most believe the worst is over for the Philippine economy and that it will rebound in 2010. For now, the dollar has been hovering around P47. It is said their is a psychological barrier of P50.50 to $1.00 USD but once crossed for a few days, the dollars should move as high as $53.
There have been some comments on this website that the Philippines is manipulating the value of the Peso and inflating it. As I’ve written before, the rate set by the government is not the rate that trading occurs at. The Philippines can buy up Peso to lower supply, that doesn’t seem to be what is happening. In fact, The Philippines is expected to create additional Peso in the next couple of months by issuing treasury bills.
So most indicators and now expeerts, believe the exchange rate will improve for expats living in the Philipines and expat finances will likely improve.
Like this post? Subscribe to my RSS feed and get loads more!