Dollar to Philippine Peso

The dollar to Philippine peso currency trading rate is very important for expats living in the Philippines. The years of 2010 and 2011 have been very bad for the dollar. Due to the economic conditions in the USA, there is little hope of that improving before 2012.

The only thing that has been keeping the dollar from dipping even lower in world markets is that the Euro is also having a challenging time. In the Philippines, the Bangko Sentral ng Pilipinas, which is the central bank of the Philippines has moved to keep the dollar to Philippine peso currency trade from sinking too low. It does this usually when there is a rapid decline in the dollar as happened around the debt ceiling debates in Washington.


Let’s take a look at the three major factors that determine the value of a currency pair using the Philippines as an example. The term currency pair means the exchange rate for one currency over another. FOREX investors have shorthand for just about everything and they show it as (USD/PHP).  The term FOREX means foreign exchange.

Major Factors that Influence Currency Exchange Rates for the dollar to Philippine Peso:

  • Demand for services, investments and products purchased with the Philippine peso
    • If a business wants to hire a Philippines call center to handle its calls, they may need to first convert their dollars into pesos. This increases the demand for the peso.  If purchases of goods, services and investments rise in a country then the demand for that currency will rise.
  • Forex Philippines speculators
    • When an investor believes the value of Philippine peso will rise against the dollar then they will want to trade dollars in for pesos before that increase takes place. 
  • Bangko Sentral ng Pilipinas
    • At times, the central bank of the Philippines will purchase or dispose of a foreign currency to bring stability to the Philippines FOREX.

Reasons Why A Country May Benefit From A Lower Currency Value

One major reason a country would want to do this is when it is in recession and internal buying.  That means the economy growth is slowing or has even become smaller or contracted. When this happens, exporting more products to other countries can help keep businesses going and help keep tax revenues up.

This is what has been going on in the USA, the dollar to Philippine peso rate of exchange fallen.  The USA wants to export more goods. This has hurt exporters in other countries so they complain the USA is devaluing the currency.

Another reason a country may wish to lower the value of its currency is if that currency is valued so high that it is hurting exports.  That happened in the middle years of 2000.

While it is great for expats it isn’t always great for those in the USA depending on exports.

Reasons Why A Country Needs a Strong Currency

With those two factors in mind, why doesn’t the USA desire keep the value of the dollar low as it can so that it can export more? Economics doesn’t work that way. Economics likes to find a balance. There is a theory in economics about purchasing power parity and it indicates that prices will rise and fall to wipe out any benefit of a lower or higher exchange rate. So the benefits above will have a limited life.

If a country has a high deficit, a strong currency will make it easier to pay down that debt. This is especially true if it has financed its debt by selling bonds in another country’s currency.

The dollar being the major currency in the world is a double edged sword. Many products from overseas are purchased in dollars. When the dollar is weak, those foreign business have a substantial loss in revenue with a weakened dollar. After they make their sale in dollars, they need to convert it back to their currency. If the value of the dollar has fallen, then their revenue has fallen. This will push the price up for those goods or commodities. For example, the price of oil has risen largely as a result of quantitative easing in the USA.

When the price of foreign products that the USA must be imported, such as oil, rises then American’s have fewer dollars to spend on domestic goods. This defeats the main purpose of the creation of money through quantitative easing.

These are the invisible hands at work, those hands that many of us learned about in high school. Eventually those hands “Will slap a government upside its head” if it gets carried away with manipulating its currency. This eventually prevents the Philippines from manipulating the dollar to Philippine peso at will.

Will the Dollar to Philippine Peso Exchange Rate Always  Be Bad?

History shows there have been wide shifts in the value of the peso to dollars exchange rate. That and economics tell me there will be good times for the dollar and there will be bad times.

During the mid 2000′s the FOREX Philippines was as high as P55 to 1 for the dollar to Philippine peso rate.  By the end of 2007 though that had change in dramatic fashion and the dollar to Philippine peso was trading below P40 in early 2008. Soon the dollar was back up to P50 for period of about a day. I believe that peak happened in the year of 2008.

dollar to philippine peso 10-yr history

Dollar to Philippine Peso 10 Year History

Google Finance

I know one retired expat that says he calculates what he needs to live in the Philippines with a dollar to Philippine peso rate of 40 to 1. He adds that anything above that rate is a bonus. That is a very conservative exchange rate but not a bad approach. This would be especially true for those on a very limited retirement income.

If one has enough money coming in from the USA to the Philippines when pesos  to dollars convert at P40 to 1 dollar, then they will likely have enough to live in the Philippines.  The only flaw I see in that is inflation will also eat away at the P40 to 1 rate but inflation will eat away at any exchange rate.  If you’re living in the Philippines the inflation rate within the Philippines is more important to you than the inflation rate in the USA. However, if you’re on a pension that determines cost of living adjustments (COLA) based on the rate in the USA then of course, the rate of inflation in the USA becomes more important. You may actually benefit from a higher rate of inflation in the USA as your COLA will rise more.

A strong currency brings a sense of national pride. People brag when their currency is highly valued. It certainly benefits me personally when the value of the dollar is high since I convert nearly all of my dollars into the Philippine pesos. The higher the dollar to Philippine peso rate of exchange is, the better off I and other expats living in the Philippines are.

That high dollar value is not always a good thing for the USA though. If you’re employed by a firm that depends on exports you already know that. A strong dollar will cause other countries to seek the goods elsewhere. This will lower the demand at your firm and may mean you loose your job or the firm ceases to exist.

Balance is what is required for a country’s currency if the economy is to remain strong. There are times when a country needs to take action that will lower the value of its currency and other times when it needs to raise the value of the currency. Going to far in either way will not work, economics will force a correction and sometimes that correction can bring hardships for those within the country.

The dollar to Philippine peso rate of exchange being low is generally not because the Philippines government is overstating the value of the peso. It may feel good to some to grumble that is the reason but it just hasn’t been the case for as long as I’ve been watching. The reasons for that should be obvious if you really delve into the article about the dollar to Philippine peso.