Where Will The Dollar Go

Peso to Dollar Exchange Rate

Seems to be a lot of reasons for the dollar to rise against the Peso.  For one, it doesn’t matter how much money the US Federal Government pours into  the banks if the banks wont loan it out.  That is the central point of the current problems for the US and the rest of the world.  As long as the banks hold on to their money, the dollar will remain strong.

This shrinkage in the American economy, will mean fewer exports to the US.  That’s true for China too.  China is predicting an 8% growth rate.  I think that is impossible in the current conditions though I wouldn’t be surprised if they manipulate numbers to make it appear there is 8% growth.  They can manipulate the numbers all they wish, the exports are going to do poorly when the West has no money to buy Chinese goods.  And don’t forget their tainted and unsafe products.

For a while, I misunderstood how important the overseas Filipino Worker (OFW) is.  I’ve seen it referred to as the savior for the Philippine economy.  These workers send billions of dollars into the country.  These remittances are expected to fall this year, not just slow, but fall.

There is one way to lessen the blow from that in fact, the Philippine government can increase the value of remittances if they lower the value of the Peso against the dollar.  This will cause the numbers to possibly increase in actual dollars.   These higher valued dollars can then buy more Peso and help to stimulate the Philippine economy.

At the same time, the lower value of the Peso would help keep exports up.  These two issues within the Philippines and the banks in the US failing to lend money should put those of us with retirements in US dollars in a favorable   position.

Within the last couple of weeks, Metrobank of The Philippines predicted that the dollar will go to 53 by year end.  I think it will go higher than that.  Their reason for the prediction was based on investors risk aversion.  That will play a role, but these other three factors, I think are more important:

• US Banks Low Rate of Lending
• Philippine Remittances Falling Unless Dollar Value Goes Up
• Philippine Need for Positive Balance of Payments (net exports etc)

will likely help encourage regulators in the Philippines to see a need for a stronger dollar.  For the expat living on retirement, the worse the  US economy does under the current situation may increase our wealth.  I’m reluctant to call it wealth, because I sure don’t feel wealthy.    Of course, the exception is, if you’re on a pension and your former employer files bankruptcy, that will cause a major depression in your finances.

I’m not going to root for a poor economy but if there is one, being a position to increase your own standing is what those with real wealth do.  Maybe, just maybe, it will help me be in a position to take advantage of low market prices just before things turn around.  I do not think now is the time.   Maybe for an expert, someone with a proven record on investing but for the rest of us, buying stock now is risky.  I wouldn’t do it.  The worst is not yet here.

For the expat living in the Philippines, especially the American expat, our money may increase in value significantly.   The  Philppine Peso to Dollar exchange rate  could go to P60 before this is all over.  I don’t know what the future will bring, but I am hopeful.

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