As the backbone of the global economy and a reserve currency for international trade and finance, the US dollar has maintained its upward spiral versus major currencies. Higher US Treasury bond yields have diverted investment funds from emerging economies, including the Philippines.
The dollar has increased by more than 11% against the major currencies. The relative worth of the US dollar is determined by the US economy’s activity and outlook.
Before we get to the factors affecting the US dollar to Philippine peso exchange rate, USD to PHP today, and USD to PHP forecast, let’s understand what an exchange rate is and what factors influence exchange rates between currencies.
What Is An Exchange Rate?
The rate at which one country’s currency may be converted into another is how the exchange rate is defined. It may fluctuate daily due to changing market forces of currency supply and demand from one country to the next.
The foreign exchange rate of a country serves as a window into its economic stability, which is why it is closely monitored and researched.
Factors influencing currency exchange rate influencing are significant for a variety of reasons. These factors can have an impact on how countries trade with one another and how much money an individual can get when exchanging one currency for another.
If you’re sending or receiving money internationally where currency exchange is involved, you’ll want to keep an eye on currency conversion rates.
Although understanding, tracking, and even anticipating these factors is not always straightforward, it is beneficial to be aware of them, especially if you are interested in foreign exchange rates.
Suppose you want to send money internationally online. In that case, you can use CompareRemit’s comparison tool online or download the app (on iOS and Android) to get the best rates and fees for your transfer.
Factors Affecting Currency Exchange Rates
Inflation
Inflation is defined as a currency’s relative buying power compared to other currencies. For example, buying an apple in one country may cost one unit of currency, but buying the same apple in a country with higher inflation may cost a thousand units of a different currency. Inflation differentials are the reason why various currencies have varying purchasing power and, as a result, different currency rates.
Low-inflation countries tend to have stronger currencies than those with higher inflation rates. Higher inflation rates, on the other hand, cause the currency to depreciate, losing purchasing power and value in comparison to other currencies.
Interest Rates
Inflation, interest rates, and currency exchange rates are all linked together. Each of these variables has the potential to influence the other two. Low inflation and high-interest rates can entice foreign capital into a country, bolstering its currency.
Higher interest rates provide higher rates to lenders, thereby attracting more foreign capital seeking higher returns, causing exchange rates to rise. Central banks use interest rates to control inflation and exchange rates.
However, if these rates are kept too high for too long, inflation will begin to rise, resulting in currency depreciation. That is why central bankers must change interest rates regularly to …….
Source: https://www.compareremit.com/money-transfer-tips/what-factors-affect-the-usd-to-php-exchange-rate/