Peso Rises After SONA

Right after the State of the Nation Address by the new Philippine President, the peso went up a few centavos.    Articles around the web indicated that investors within the Philippines were pleased with what they heard in the speech.  I’m not sure why.  It didn’t seem all that promising to me but I’m new to watching Philippine politics.  I think it takes more than two years as a casual observer to understand something as complex as politics in the Philippines.  I don’t think the Peso went up, I think the dollar is taking a dive!

In the last week or so, the dollar has fallen from around 46.5 pesos to around 45.0 peso.  That’s starting to sting.  If an expat ears a pension of $1500 a  month he just took around a $50 hit.  Doesn’t seem like much but after two years in the Philippines, fifty dollars is a lot of money to me.  Not that it every wasn’t a significant amount.  Maybe because when I was a teenager I earned $25 a day.

I’ve been missing the days when the peso was near 50Php per 1USD.  I certainly do not want to see a return to 1 US dollar bringing 39  Philippine Peso.

I don’t know if it is the peso rising or the dollar falling.  Some bad economic reports are coming out of the USA.  Bad enough that we could be headed for a second recession.  If that happens, you might just be able to stick a fork in President Obama, rightly or wrongly, he’ll have a hard time recovering from that!

I don’t know what could be done to help.  We already spent too much in the USA.   The interest rate is near zero already, hard to cut zero.    Tax cuts could help but is it the smart thing to do?  Might have no choice but to run the deficit up even more.   I don’t know what the deficit is in relation to GNP and that’s really all that matters.  Raw numbers mean squat.  A one trillion dollar deficit in a two trillion dollar economy, now that means something.   I just picked those numbers out of the air.  If half of our economy was based on the government spending more than it had, we’d be broke beyond belief.

Deficits generally make the dollar weaker but a depression will be worse.   Far worse  I hope the thing we don’t learn from the last recession is that if you are too aggressive in fighting it, there will be no way to further stimulate if there is a second wave of bad economic conditions.

I just took a look at Google Finance and the dollar appears to be down against most currencies.  Looking at one day though, means very little.  I took this snapshot of the dollar to Peso and Euro for the last 30 days and its ugly.

currency graph

USD vs Philippine Peso and USD for Last 30 Days

You can visit Google Finance and play with the charts yourself.  You can also click to enlarge this graph.

This next graph shows that the dollar is still up for the year against the Euro but when compared to the Philippine Peso, it is down a little at the moment.  Since the dollar is falling against the other currencies, that doesn’t mean the Peso is improving, to know that, you’d have to compare it to other currencies.  It also shows that the Php is much more stable in value in relation to the dollar over the last year.

currency graph

Dollar Vs the Philippine Peso and Euro so far this year.

I often hear expats say the Philippines sets the value at whatever they want and tell us what it will be.  This limited information disputes that.  It might indicate that the value of the Peso is very dependent on the value of the dollar.  It doesn’t mean that, its not enough data but it might be worth looking into.

Please dollar go back up!

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Filed under: Expat Finances

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