The Falling Dollar and Its Effect On You

In the Philippines, remittance from overseas Filipinos is one of the things that lift the Philippine economy because of the cash inflows it provides. Most Filipinos in the US still have families back in their homeland and they remit money to help them out with their finances. I

n July of 2006, the exchange rate was US$1 to P53.05 (Philippine peso). This time around, the exchange rate has fallen to P47.00, thats a 11% decrease. This decline in the dollar means the recipient of the remittance will receive less money if the sender is sending a set US dollar per month. For example, if the sender is remitting $100 per month, then the P5,305 that the recipient received back in July of 06 will be reduced to P4,700 at today’s current rate. So if the recipient wants to maintain that P5,305 per month stipend, then the sender needs to remit an extra $13!! The dollar continues to fall not only against the Philippine peso but against other currencies as well.

Here’s how the falling dollar is ALSO going to affect you!!!

Assuming that the local or domestic prices of a particular country stayed the same but the value of US dollars declined, below are the impact on the people that are living in United States:

The Negative Effect:

Travelers Going Overseas- If you are traveling to a different country, then your travel expenses will take a big hit because it’s going to cost you more to stay in hotels, eat dinner, take the tours, or purchase merchandise.

Investing Abroad-if you like investing internationally, then the purchase price of investments such as real estate, stocks or an active business will also be at a premium!!

Increase in Import’s Price – just because you’re not traveling overseas does not mean that you are not going to be affected. Your favorite European clothing, Swiss cheese, Italian wine, Japanese/European cars, or oriental rugs that are sold at a local retail store will increase in prices as well. Of course, the prices of those items that have been sitting on the shelves will not increase, I am talking about the new purchase items or inventories!! However, I’m sure you know that this does not apply to the gas companies, where the increase in gas prices are almost immediately seen even on the current inventories!!

The Good Side:

More Exports – if you are an exporter, the fall of the dollar means that your products will be more attractive abroad because it would cost less for other countries to purchase what you’re selling. This means that our economy will still benefit as well because an increase in exports means an increase in production, which translates to more jobs!!!

Increase in local tourism – if it’s going to cost you more to travel overseas, the corollary is also correct, it’s going to cost less for citizens of other countries to take a vacation in the US. With the fall of the dollar, more tourists will consider taking a vacation here in the US because they can stretch their currencies. This is also good for the US economy because these tourists will start spending money here in the US!!

Increase in local investing – with the fall of the dollar, investing here in the US will look like a bargain depending on how much the decrease is on a particular currency. Going back to the Philippine peso exchange rate, an individual who is based in the Philippines can invest here in the US at a 11% discount compared to the prices last year (assuming that US prices stayed the same for those time periods)!!