Why That Pesky Exchange rate Is The Way It Is
Since I moved to the Philippines 8 months or so ago, my ‘real income” had taken a huge hit … as much as 15% … in the wrong direction, of course. People in Canada, in the UK and every other country I can think of … who earn any significant percentage of their money in US dollars … have also taken a nasty hit also. Since my government furnished COLA (Cost Of Living Allowance) will likely be a rise of maybe 2.4% next year I am not exactly throwing out the beer and replacing it with Champagne, either.
The problem? the US dollar, once the “standard currency of the world” has dropped in value against virtually all other major currencies … and even against the lowly Philippine Peso … a currency that couldn’t get any respect for years.
When we talk about this not so happy event here in the Philippines all kinds of reasons surface … some of which probably have validity, others are just off the cuff opinions. The real answer is, no one can tell you why for sure. There are a lot of factors at work. After I read this article:
50 Factors that Affect the Value of the US Dollar
August 8th, 2007
By Jessica Hupp
Would you believe something as mundane as a rainstorm in New England can affect the value of the Dollar? It’s true. The US Dollar is subject to numerous influences, from politics to Walmart, and everything in between. The following list contains 50 factors that affect the value of the US dollar, both big and small… Read more about the 50 factors here:
Jessica outlines 50 factors that many of us have probably never even considered. Like everything else that’s based, at least in part, on people’s opinion, I don’t subscribe to all her factors, but there are some in there that are well worth thinking about. Recommended read.
Related posts:
Related posts brought to you by Yet Another Related Posts Plugin.
October 27th, 2008 at 6:11 pm
Is this a re-post of an earlier article?
With the dollar gaining against other currencies over the past few months (e.g., PHP-to-USD 40.52:1 @ 3/1/08; 48.96:1 @ 10/26/08), and federal 2009 COLAs being reported as 5.8% for CSRS, Socical Security, SSI and military retirees (4.8% for FERS), I wonder the article may have been composed in the darker, uncertain days?
The info regarding reasoning behind currency fluctuations is spot on (logic doesn’t play as large of a part in this reasoning as it should, though
).
October 28th, 2008 at 6:54 am
@Paul: Ha ha guilty as charged, paul. I apologize for not updating this post … I usually recycle one or more per week just so that people know somehting about what is buried ‘deep in the archives’, but sometimes it might be a better idea to just re-write the whole thing.
As you say though, aside from the current direction of chnage, there is nothing at all ‘old’ about the ideas behind the change. The peso’s vcalue against the dollar changes in ways that are not easy to define mathmatecially. If they were, we;’d all have a
Forex Account and be rich
October 29th, 2008 at 4:05 am
The exchange rate is very confusing to me, much like most if not all women. It seems lately when the DOW Jones drops the exchange rate grows and then when the DOW Jones gains the rate decreases. My logic (lack of it) tells me the opposite should be true.
Today is the first exception I have seen during the last month, as it stands now: 48.7995315 PHP to 1 USD.
The highest it has been in the last 5 years the best I can tell is: 57 to 1, Jan ‘05
The lowest it has been in the last 5 years the best I can tell is: 42 to 1, Feb ‘08
As you know money flow is the most important issue for me before I move to the Philippines. My plan is to make enough money “online” to live in America before I make such a move. Actually currently all my current income comes from online now but I fear having a single revenue stream so that is why I am yet to move.
I recently posted about a house for rent in the Philippines. The cost is PHP8,000 /month.
With the current exchange rate the USD cost is: $163.94 /month
With the lowest exchange rate of the last 5 years the USD cost is: $190.48 /month
Either way that is a lot of bang for your American buck, even with the 16% added cost. Still I understand how scary this must be to many and this is why I must secure additional revenue streams before I move. For the record, my blog is not one of the “streams” I am referring to.
In case anyone is curious the conversion of the house when the exchange rate was at it highest in the last 5 years I will share with a donation made out t…. ah.. kidding..
$140.35 /month
October 29th, 2008 at 11:23 am
@Mike: You have those rates nailed pretty accurately as far as I can see, Mike. That’s one of the issues about living overseas that many have trouble getting their head around. Especially in today’s world, many currencies, not just the US dollar are volatile … and it follows no obvious rhyme or reason. In the past month or so the Yen has gained big time against the dollar … indicating the dollar is very weak. yet the peso has dropped big time against the dollar … why is the dollar unwanted in one country and yet big time in demand in two Asian nations only a four hour plane ride apart. The Philippine peso has lost steadily aginst the Yen all yearas well, so simpe, logic doesn’t account for the prices at all.
October 29th, 2008 at 6:38 pm
A little more info re: recent currency exchange rates seeming funny when viewed during a faltering economy:
http://www.reuters.com/article/ousiv/idUSTRE49R6L620081028
Again, it isn’t one or two (or ten) factors, but a whole world of factors that cause exchange rate fluctuations not in line with economic views. This time, the USD’s strength is coming from the US doing something (regardless of whether it’s good or bad policy) while other countries sit back and watch.