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Thread: Peso Losing Value Against Dollar

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    Default Peso Losing Value Against Dollar

    What does this mean? I've been here seven years and the value of a peso has dropped from 37 pesos to a dollar to 48.1 and it looks like it's going to continue this trend. I am guessing that that price of products will continue to rise accordingly but I am curious to know if there are any other effects.... Thanks!

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    If you were here about 13 years ago when Hippo was in office you would have seen the peso at 50.

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    Quote Originally Posted by judypdr View Post
    What does this mean? I've been here seven years and the value of a peso has dropped from 37 pesos to a dollar to 48.1 and it looks like it's going to continue this trend. I am guessing that that price of products will continue to rise accordingly but I am curious to know if there are any other effects.... Thanks!
    well, when the peso devalues relative to the dollar, imported products become more expensive to Dominicans, and Dominican exports, like tourism, become cheaper to people who are paying in dollars..

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    Currency - just a part of the Circle of Life. Remember this:
    https://www.youtube.com/watch?v=qKV9bK-CBXo

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    Quote Originally Posted by judypdr View Post
    What does this mean? I've been here seven years and the value of a peso has dropped from 37 pesos to a dollar to 48.1 and it looks like it's going to continue this trend. I am guessing that that price of products will continue to rise accordingly but I am curious to know if there are any other effects.... Thanks!
    In the shorter term, what it means is that the Banco Central, to their credit, is getting out in front of a potential US fed rate raise next week. If you pull up a chart of USD/DOP you will see that just prior to the feds raising rates in March and June, the Banco Central slowly and orderly moved the peso down against the dollar.

    As a broad general rule but not always, when a country increases its rates, it strengthens its currency i.e., it gets more expensive to buy USD in other countries, weakening theirs, particularly in LDC's (lesser developed countries). Reasons for rate raises vary from curbing inflation to attracting more foreign investment, etc.

    Barring a black swan event in either country, like the DR banking crisis and recovery, the peso has been on a weakening trajectory from its days at parity 1:1 with the dollar to its current 48:1.

    If interest rates in the US continue to rise, prices for goods in the DR will likely continue to slowly rise as the peso weakens, again barring any black swan event, or also if internally, the DR raises taxes as they did on ITBIS (VAT) from 16 to 18% for most goods.

    This (currency devaluation) is also one of the many reasons why people who "invest" in peso certificates of deposit should be cautious.


    Respectfully,
    Playacaribe2

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    Quote Originally Posted by playacaribe2 View Post
    I
    As a broad general rule but not always, when a country increases its rates, it strengthens its currency i.e., it gets more expensive to buy USD in other countries, weakening theirs, particularly in LDC's (lesser developed countries). Reasons for rate raises vary from curbing inflation to attracting more foreign investment, etc.

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    Playacaribe2
    I am not sure how going from , say 48 to 50 DR pesos per dollar would strengthen the DR peso by making it harder to buy US dollars. Can you further explain that point? I understand how it could be cheaper for those with US dollars to buy DR goods for a short time until the DR raises prices to compensate. I always thought of such events as a weakening of the DR peso.

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    On a related note, although Dominican business men always predict a horrible crisis for the next or second next year, this year I’ve heard more than ever how many business men are expecting a serious economical crisis for next year, including bank officials warning their customers for next year. Relating things to the new money laundry law which will cause trouble because of the big part of the economy that apparently is managed ‘fuera de los libros’

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    Wonderful. I love it when they use this exchange rate to attempt
    to charge more for items produced and sold locally. Too funny.

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    Quote Originally Posted by windeguy View Post
    I am not sure how going from , say 48 to 50 DR pesos per dollar would strengthen the DR peso by making it harder to buy US dollars. Can you further explain that point? I understand how it could be cheaper for those with US dollars to buy DR goods for a short time until the DR raises prices to compensate. I always thought of such events as a weakening of the DR peso.
    It doesn't. It weakens it by forcing holders of pesos to pay more pesos to acquire dollars.

    "As a broad general rule but not always, when a country [US] increases its rates, it strengthens its currency i.e., it gets more expensive to buy USD in other countries, weakening theirs, particularly in LDC's (lesser developed countries)."


    Respectfully,
    Playacaribe2

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    Quote Originally Posted by playacaribe2 View Post
    It doesn't. It weakens it by forcing holders of pesos to pay more pesos to acquire dollars.

    "As a broad general rule but not always, when a country [US] increases its rates, it strengthens its currency i.e., it gets more expensive to buy USD in other countries, weakening theirs, particularly in LDC's (lesser developed countries)."


    Respectfully,
    Playacaribe2
    Understood, but that is not how I read what you said in your post on strengthening a currency in your earlier post on this thread.

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