There is a lot of ideas we can pick up by visiting a new country or simply by look at exchange rate poster at our money changer. Yeah, exchange rate has been influential in many aspect. wether we realize it or not, monitoring exchange rate is always necessary. Need an example? Just take a look at USD to PHP exchange rate, or in a more specific sample, look at the change of your dollar to peso. as a sample taken from 16 year period, from January 2003 till January 2019, in average exchange rate of USD to PHP were Rp 51,29 and its stable. But on the next year, in January 2014 the exchange rate fell into RP 45,5 and it will generally fluctuate until nothing can be done to stable its rate. And as 2019 the exchange rate were RP 52,5 and it still fluctuates until now in a range of 48-52. It directly give an impact to some of citizen, especially for whom that want to get an USD or already have some USD caused by foreign money trading or some of payment in dollar. Usually they will monitor dollar rise and looks at good opportunity to buy dollars. Because it will affect if they earn extra money converted to Rupiah. There are many factor that can indirectly affect exchange rate between USD to PHP or any others currency, and these factors usually in correlation between one condition to another. And one of the most impact is political condition. Year 2014 is a critical year for Indonesia because it will hold an presidential election. This situation has made a lot of investor sold US dollars and change it to Rupiah to anticipates the worse political condition. It were significantly make Rupiah stronger than US dollars at that time and relatively keep raising until election were done. But, in some condition political affects only a little and generally doesn’t influence entire exchange rate. Exchange rate is an public secret the state of nation economy and its oftenly used because the issue of import and export. High demand of currency to perform an import and the lowering of getting money from country export could potentially reduce exchange rate of country’s currency. This situation many in correlation with one another sector like interest rate and inflation high inflation rate and interest fee will make a investors pullback their investment to an another securities or take it back to their country. This condition will made a demand for foreign currency and of course it will reduce an exchange rate of currency. And by knowing the factors, we can predict future exchange rate and take an anticipative action to prevent any unwanted event. The aim of this paper is to analyse the exchange rate of US to PHP from several factor and its causality on the next condition of exchange rate. And may this paper become an valuable information to foreign money traders who want to earn more money by purchase foreign currency and to another person whose have an interest on exchange rate . This paper consists three further section and written linearly. In first part section will explain about the exchange rate of USD to PHP from graphical visualization and generally looks at fluctuations and trends that happened. Section two will explain about the theory of exchange rate and factors affecting it and also will be useful for theoretical reference in analysing exchange rate. And last section will explain the analysis of exchange rate from several factors and how much does it affect the next exchange rate.
Overview of USD to PHP Peso Exchange Rate
Exchange rate refers to the value of one currency with respect to another. It is the price of one country’s currency in terms of another country’s currency. The exchange rate plays a fundamental role in international trade and the economy. It may be used to determine the cost of foreign exchange in a variety of methods, namely the foreign exchange rate method, inconvertible currency method, account method, and a variety of others. Exchange rates are classified into two types: nominal exchange rate and real effective exchange rate. The nominal exchange rate measures the relative price of one currency in terms of another, while the real effective exchange rate is the nominal exchange rate adjusted for price levels of the two countries. Exchange rates are determined by the foreign exchange market, i.e., supply and demand of foreign exchange. The supply of the currency is derived from the demand for imports of foreign goods and services, and the demand for currency is generated from the foreign demand for goods and services of that country. Exchange rates can be either floating or fixed. A floating exchange rate is when it is determined by the private market through supply and demand, while a fixed exchange rate is when the government attempts to influence the value of their currency.
mportance of Monitoring Exchange Rates
Exchange rate determination is a complicated process that depends on a multitude of factors. The rate is currently around 56 pesos to one US dollar. Exchange rates are either floating or fixed. A floating rate is determined by the private market through supply and demand. Governments or central banks only intervene in rare cases to ensure economic stability and to avoid currency speculation. A fixed rate is when the government says that its currency is worth a certain amount in terms of other currencies or has a dirty float with a fixed range of a few percentage points. There have been many different exchange rate systems in the history of the US and Philippines; at one stage, the rate was as low as two pesos to one dollar. Exchange rates are effective in the short run, which means that the current rate’s effect on the market is more important than the long term. It is very difficult to pinpoint exactly why the rate is at its current state and what the exact effects of the rate are. This is because exchange rates depend on a variety of economic and non-economic factors.
Exchange rates are extremely important in the determination of a country’s external trade balance. They also play a big role in the value of each country’s currency. Many businesses look at exchange rates and determine whether it is a good idea to expand into a certain area depending on the strength of that country’s currency. The USD to Peso exchange rate is of utmost importance to the Philippines, due to the amount of remittance sent by overseas workers in the United States. This means that a weaker dollar will result in less earnings for their families back in the Philippines. It means that the Philippine government will often look to intervene and try to strengthen the dollar to improve the standard of living for many of its citizens. With a stronger dollar, this would also encourage more investment in the Philippines from the US, who would be looking for a weaker currency if they are to benefit in the long run from their investments through the exchange rate. As the US is the largest investor in the Philippines, exchange rate shifts largely affect the magnitude and value of these investments. So not only would more investment be lured in, but also the US companies already present would feel more secure in their investments and are less likely to pull out. Exchange rates define the value of one nation’s currency in terms of another’s. It is a measure of the relative worth of one currency in terms of another.
Factors Affecting USD to PHP Peso Exchange Rate
The forex market is of speculative nature. The effects of trading one currency for another and positions of currency exchange will have inherent and contingent risk. Generally, the forex market is used as an effective risk transfer mechanism. However, currency speculation will inevitably lead to profits or losses. Since foreign exchange rates have a direct impact on one’s income, margins, realized and unrealized gains and losses in non-base currency terms, it is crucial for corporations or even individuals to have a good understanding of the foreign exchange rate and its market. In the context of doing business, incorporating risk management strategies, exchange rate volatility acts as a signal for companies to initiate some exchange rate risk management procedures. Using the trends of the exchange rates to prepare plausible budget revisions, whether profit margins may be affected, etc. Exchange rates are hard to predict, but understanding the intertwined relationship between the exchange rates and the impact on profit margins will help in decision-making strategies.
Foreign exchange market is one of the largest financial markets in the world. It is an over-the-counter market where buyers and sellers conduct foreign exchange transactions, also called foreign exchange of money. It primarily involves converting or selling one currency to another, termed as foreign currency. The forex market was created in 1971 upon the abolishment of fixed currency exchanges and free market exchange rates were introduced. This market is different from other financial markets. The forex market does not have a physical location as there is no central exchange. It operates 24 hours a day, 5 days a week.
