How Soon will the peso reach 50 to 1 for the USD?

windeguy

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Jul 10, 2004
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Pichardo has not been posting much since his return, so I was wondering if he had any insight into when the DR peso would be at 50 to 1 for the US dollar.
 

Castle

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Sep 1, 2012
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I'm no economist and don't know how to estimate this. But if we project in time using the current devaluation rate, it'll take at least 5 or 6 years. Let's do the math:

8 years ago it was at 27, so in 8 years the peso decreased its value in about 33%.
From 40 to 50 it's about a 25% devaluation.

If it took 8 years to reach 33%, how many years would it take to reach another 25%?
33 ------ 8
25 ------ X
X = (25 x 8) / 33 = 6.06 years
 

windeguy

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Jul 10, 2004
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If the search function actually worked on DR1, it would be easy to find the post where PICHARDO said that if the peso were allowed to float, it would be at 28, which I found quite amusing.
 

william webster

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Jan 16, 2009
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I'm no economist and don't know how to estimate this. But if we project in time using the current devaluation rate, it'll take at least 5 or 6 years. Let's do the math:

8 years ago it was at 27, so in 8 years the peso decreased its value in about 33%.
From 40 to 50 it's about a 25% devaluation.

If it took 8 years to reach 33%, how many years would it take to reach another 25%?
33 ------ 8
25 ------ X
X = (25 x 8) / 33 = 6.06 years

I don't think "straight line" math works in these circumstances.
Like plotting a childs growth..... if the rate continued, at some point they'd be 11 feet tall.....
 

Tamborista

hasta la tambora
Apr 4, 2005
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If and when there is a run on The USD, The DOPUSD will move several handles in 6.06 hours not years. I am not predicting this, but based upon the Fx gyration that Hipolitio was able to accomplish in a matter of hours from 55 to 62 two administrations ago, this is not that far fetched. It needs to get to 45 before folks really start getting their knickers stained.
 

the gorgon

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Sep 16, 2010
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If the search function actually worked on DR1, it would be easy to find the post where PICHARDO said that if the peso were allowed to float, it would be at 28, which I found quite amusing.

yes, it would be at about 28 to 1, since it is such a desirable currency. everyone in the world wants pesos, didn't you know?
 

jabejuventus

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Feb 15, 2013
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From 27 to 40 is around 50% deval. So your formula should be 50 is to 8 as 25 is to X. I'm not sure that this is an appropriate proportion to use though. For more accuracy you would want to show data for 25% change to compare w/current 25% change, or extrapolate from the 50% change listed to say that in another 8 yrs. there will be another 50% deval., i.e., the peso w/be @ 60 to 1.

As much as we may try, this is all very unscientific. The dollar value is waivering due to massive American debt obligations. If this doesn't get resolved, the dollar may hold steady, if not devalue somewhat. Debt and trade are important variables. If DR can trade while keeping their own debt obligation down in comparison to the US (another ratio to consider), then the dollar/peso will remain stable. Easier said than done. As quiet as its kept though, DR does have an economy. I may be not be totally accurate on my foreign exchange assessment (I'm not an economist), but am pretty sure about my math (retired math teacher).

Foreign exchange market - Wikipedia, the free encyclopedia
 

jabejuventus

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Feb 15, 2013
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Of course, I know that you know that if you speculate a continued devaluation of the peso, you shold be in dollars and viceversa. To play it safe, 50-50.
 
Apr 13, 2011
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I am not sure when or if it will spike to 50:1.
I remember 4 years ago first doing transactions at 35:1, then it seem to linger at around 36:1 for a year - then slowly bumped up to 38:1 and seemed to stay around there for a while.
But the rise, from just under 39:1 in September, to just under 41:1 now does seem to a faster increase than any other time in the last four years.
But I was not here 5-6 years ago when there was the banking crisis and the rates skyrocketing.
XE has an interesting chart showing how the rate has been creeping up over the years since the banking crisis in the DR.
XE.com - USD/DOP Chart
 

Castle

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Sep 1, 2012
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Yes, you're all correct. Only unless child growth and river shrinking, devaluation can be controlled. In fact, I'm pretty sure the peso costs what they want it to cost for the time being. Banco Central has intervened several times to control the dollar when it has wanted to get out of control (up or down). Watch carefully the relation US$/Euro during the past few years. It has changed a lot in both directions and yet the relation US$/DOP has kept the same tendency. That tells me there's something else going on in DR besides free market fluctuations. If this way of managing currency is good to people in DR or not, I don't know.
 

Tamborista

hasta la tambora
Apr 4, 2005
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Of course, I know that you know that if you speculate a continued devaluation of the peso, you shold be in dollars and viceversa. To play it safe, 50-50.

How is a 50-50 mix playing it safe?
If my crystal ball indicated 50:1, the last currency I would have any exposure to would be RDP.
EURUSD is a better long on a dip for you punters!
 

jabejuventus

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Feb 15, 2013
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50 - 50 is figurative. It's an expression of the difficulty and uncertainty involved, as many of the posts have expressed, in evaluating trends and economic conditions. Right now, probably 60 to 40, or even maybe 65 - 35, dollar to peso ratio in banks is the best bet.
 

zoomzx11

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Jan 21, 2006
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not that the DR will ever do it but would be smart to change to US dollars and get out of the silly peso business. Nice thing about Panama is they are on the dollar and it makes things nice. Another good part of living in Panama.
 

Olvidado

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Jun 19, 2012
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You need to take into consideration the US Dollar as well, not just the DR Peso. I'm not an economist but the Dollar also changes as well.
 
May 29, 2006
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I've seen it has high as 13:1(LONG time ago) and as low as 50:1. A cheap peso is great for tourism and exports but bad for gas and other imports.
 
Jan 9, 2004
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A cheap peso is great for tourism and exports but bad for gas and other imports.

President Medina has already signaled that he will help boost exports. To that end he must keep the peso weak. And, as you correctly point out, the other beneficiary of a weak peso is tourism/tourists which by banco central figures is growing stronger/climbing.

And as been pointed out above, the losers in this appear to be the citizens/residents who are paid in pesos. The interesting point here is that there is a growing consensus for higher wages from any number of emplyment sectors. Education is demanding a pay increase, transport is demanding further subsidies, and so on. This would be an inflationary event and cause still further weakening in the peso.

The net effect is a peso that looks to continue to weaken vis a vis the Dollar/Euro. The only question is how rapidly?

And that answer depends largely on many other factors outside of the DR. If the Federal Reserve decides to switch from a weak dollar to a strong dollar policy, that would of course be very bad for the peso. If Chavez dies, and he is not well at all, then the Petrocaribe agreement would be in danger and that would have a massive and immediate effect on the economy of the DR and by extension the peso. These are by no means the only factors, but they are the ones the DR should be most concernned with at this point.

To the OP's question, while I can not and will not predict when the peso will hit 50:1, it will certainly be before it strengthens to 28:1.


Respectfully,
Playacaribe2
 

palmiche53

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Dec 17, 2012
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-Never. The us economy is a mess. Most 3rd world countries are having problems keeping their currencies to appreciate on a daily basis vs the us dollar (i.e peruvian sol, colombian pesos etc..) The only country who is really at the mercy of the US dollar is canada. Just move to Canada to see the Cdn dollar going back to 0.65 x us dollar very soon. The DR has a pegging sys to the US dollar to protect exporters, J Balaguer was the mastermind behind this policy.