Will the Dominican Peso ever go back to be One to One with the Dollar like back in 1983/1984 (February)

Jan 9, 2004
10,134
1,330
113
The peso has so far held up remarkably well against the USD.............perhaps too remarkable.

For those watching, the Euro has recently plunged from 115 to trading today at low of 103 to the USD and the Japanese yen is at a 20 year low against the USD.

Yet the peso holds steady.........at least for a bit longer.............then.......................


Respectfully,
Playacaribe2
 

pinonuevo

Active member
Dec 7, 2020
128
33
28
Roman
One of the greatest advantange is that the Dominican Government will not be able to devalue your savings; also it is an inflation fighting tool.
 
Jan 9, 2004
10,134
1,330
113
One of the greatest advantange is that the Dominican Government will not be able to devalue your savings; also it is an inflation fighting tool.
With Dollarization that would be true.............but then the USD is not immune from inflation either.......albeit at a slower rate than the peso.

If Dollarization was the answer to many countries financial problems, many would have done it long ago.

While Dollarization would spur foreign investment (no foreign currency exchange risk), it would deprive those countries Dollarizing of their secret weapon...............seigniorage..............


Respectfully,
Playacaribe2
 

pinonuevo

Active member
Dec 7, 2020
128
33
28
Roman
Are other countries in the Americas better off when they dolarized the economy; when they peg one to one to the dollar, like many economies in the the caribbean and central america?
 

NanSanPedro

Nickel with tin plating
Apr 12, 2019
4,165
3,431
113
Are other countries in the Americas better off when they dolarized the economy; when they peg one to one to the dollar, like many economies in the the caribbean and central america?
I think that an example would be Panama. From appearances, they're doing well. But I don't know any details about how they're going.
 

korejdk_again

Newbie
Mar 26, 2019
39
9
8
The DOP "IS" pegged to the USD "just as" HKD or SGD are (different barrios interests rule that) ....let's just say the other cousin, the MXP is at times left to be on it's own (float), yet the DOP, as a "little distant cousin" gets a break. DOP will ride the wave along (behind) the world's surfer while the wave (and direction) lasts...and there are many conflicting waves occurring right now, yet the DOP does only care about the wave the USD rides since it has no choice!
Tambo is the pro ... if he cares to comment.
 
Jan 9, 2004
10,134
1,330
113
The DOP "IS" pegged to the USD "just as" HKD or SGD are (different barrios interests rule that) ....let's just say the other cousin, the MXP is at times left to be on it's own (float), yet the DOP, as a "little distant cousin" gets a break. DOP will ride the wave along (behind) the world's surfer while the wave (and direction) lasts...and there are many conflicting waves occurring right now, yet the DOP does only care about the wave the USD rides since it has no choice!
Tambo is the pro ... if he cares to comment.
"Pegging" implies a Central Bank decision to maintain a tight correlation to another currency. The trading range is generally in a narrow band. The Chinese Yuan or Renminbi is pegged to the dollar. HKG is also pegged. The SGD is not (although at one time it was pegged to the GDP (British Pound). MXP has been free floating since the 90's and has gone through a number of severe devaluations.

The DOP is not pegged to the dollar (certainly affected by it, but not pegged) as witnessed by its demise since the 1980's from 1:1 to its current status.

For a more broader view;



Respectfully,
Playacaribe2
 

El Hijo de Manolo

It's outrageous, egregious, preposterous!
Dec 10, 2021
1,862
1,256
113
Dominican Republic
"Pegging" implies a Central Bank decision to maintain a tight correlation to another currency. The trading range is generally in a narrow band. The Chinese Yuan or Renminbi is pegged to the dollar. HKG is also pegged. The SGD is not (although at one time it was pegged to the GDP (British Pound). MXP has been free floating since the 90's and has gone through a number of severe devaluations.

The DOP is not pegged to the dollar (certainly affected by it, but not pegged) as witnessed by its demise since the 1980's from 1:1 to its current status.

For a more broader view;



Respectfully,
Playacaribe2
Thanks for this. Very interesting led me to a quick Google search and this background that much of I was unaware. Interesting history
"DOP (Dominican Peso)" https://www.investopedia.com/terms/d/dop.asp
 
  • Like
Reactions: Buzzard

pinonuevo

Active member
Dec 7, 2020
128
33
28
Roman
Lots of other currencies are losing ground against the dollar; why is the Dominican Peso gaining ground against the dollar?
 
Jan 9, 2004
10,134
1,330
113
Lots of other currencies are losing ground against the dollar; why is the Dominican Peso gaining ground against the dollar?
I am not sure you can say it is gaining ground as much as you can say it gained ground.

Remittances in dollars were extradordinary. November/December saw excellent tourist numbers. Price of gold moved up nicely. All of those contributed to its International Reserves. Ditto all of its bond borrowings in dollars.

However, the headwinds are obvious and approaching, such that the President has taken the extraordinary step to warn the country that tougher times are in front of the DR.

Externally, those headwinds include worldwide inflation, the war in Ukraine etc.

Internally, the DR has been raising salaries of workers across the board and has been subsidizing both the family basket and oil imports, all of these are inflationary or lead to inflation.

Tourism has dialed back, and while good, has slipped below pre-pandemic levels.

I see no reasons the peso can gain (strengthen) against the dollar, but a myriad as to why it may begin to slip (weaken).

Hopefully, the decline, if it comes, is orderly. What has happened to the Euro and Yen recently was a quick and sharp decline in their value vis a vis the dollar, and while they can to a large extent absorb it without to much pain.................the DR does not have that luxury.


Respectfully,
Playacaribe2