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Wow, the US dollar to Philippines peso exchange rate has been in a long slump if you’re an American expat living in the Philippines. This affects more than just Americans, it is also hard on many Filipino families. Most Filipinos that work overseas (OFWs) send dollars back home to their families.
It also affects some international Filipino businesses. Many times they bill in dollars. When the dollar is falling, they loose revenue. When they prepare their Philippines income statements the funds are converted back to pesos. Thus, their gross receipts could take a substantial hit.
Dollar to Philippines Peso Exchange Rate is Low
For expats that live in the Philippines, it takes a direct impact on our standard of living. I personally have seen more than a p10.000 drop in my income. That is over $200 . The exact amount depends on which exchange value you use. The highest exchange rate that I have seen while living in the Philippines was P50 to 1.
If the US dollar to Philippines peso exchange rate is 45 to 1 and you send $1500 from your US bank account you get p67500.
If the exchange rate is 40 to 1 and you send over $1500 you get p60,000 or P7500 less. If you use an US dollar to Philippines peso exchange rate of P42 to 1 as your base then you’ve lost $179.00. That’s enough for many expats to pay their rent.
To make the impact worse, you have to remember that in the Philippines growth has been mild to good. Thus there is inflation. Also, electric cost have risen a great deal. So prices are rising while my income is falling. That’s the same problem that international companies in the Philippines face.
Now the exchange rate is around P40 to 1. It may be a little higher than that but that’s the rate I have been getting with Xoom for months now. I need to get a dollar account in the Philippines so that Xoom doesn’t get to take out their extra amount in the conversion. If I use an ATM card, I get about 1 peso more per dollar but the cost of using my ATM card is too high to make that a consideration. If you have the cash to do so, you might want to open an account at HSBC as they don’t charge fees. The ATM you use might, probably p200 but you can’t really get around a fee.
The dollar to Philippine peso has been at this pitiful rate for a long time now. Longer than I can remember. It had climbed back up to 43 to 1 and then started to fall again. There is a new round of quantitative easing (creating money) in the USA so the supply of dollars is up. As long as that is going on, we can’t expect much change.
This graph shows the downward trend of the US dollar to Philippine peso since 2009. Notice the rise in the middle of 2012. That coincides with the end of quantitative easing. But it didn’t last long and the result is the dollar to Philippines peso rate of exchange is near P40 now.
I have not been following this as close as I use to but it appears that the Philippines central bank is stepping in to keep the dollar at or above P40 to 1 USD. So many times, I’ve heard foreigners say that the Philippines is propping up the peso. They really don’t have a lot of incentive to do that, outside of corruption. With 10 percent of the economy based on OFWs lowering the dollars value has a detrimental effect. An exception to that would be if the Philippines issues bonds in US dollars. If the peso is higher, it is cheaper for the Philippines to pay those bonds back if the dollar is low.
I found an article where a Filipino writer suggest the exchange rate is “tipping in our favor.” That just isn’t accurate. Yes the peso is up but that doesn’t imply it is a good thing. The USA is constantly complaining about China undervaluing its currency. A weak currency boost exports. A strong currency hinders exports. That author also cites the increase in money supply in the USA as a major contributing factor to the decline in the value of the dollar. You can read his article here.
It isn’t a bad idea to assume the dollar will be at 40 to 1 when making your plans to live in the Philippines. When it is higher you can use the extra money for fun or a special project.
Some will tell you the dollar is doomed along with the USA. They have been saying that since I was a teenager. That was a long time ago. The dollar will rise again. What is keeping the dollar down is pretty simple and it is quantitative easing. Quantitative easing is great for a sluggish US economy when inflation is low but it is horrible for expats.
It isn’t going to last forever, the dollar to Philippines peso exchange rate will likely improve as soon as quantitative easing comes to an end in the USA.
Filed under: US Dollar to Philippines Peso
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