Pensions and currency exchange rates

[OnMyWay]

When you move to another country and your pension is in your home country currency, you have to live with currency fluctuations.  There are many factors that influence world currencies.  In the year preceding my move, the dollar was not doing well, and it was scary.  So far, since I moved here, I have been lucky in that the dollar has become stronger in the world markets and against the peso.  Will that go one forever?  Nope.  I'm going to have to live with it when the dollar falls, which it will.  It may have already started.

Here is a 20 year chart of dollar vs. peso.  I moved here in Oct. 2012, so I caught the bottom.  Lucky me!

This website has some good articles on currency trends.  This one is on why the dollar is strong right now:

https://www.thebalance.com/dollar-strength-why-is-it-so-strong-right-now-3305726

How about the Aussie dollar?  It was insinuated in another topic that current U.S. trade policy with China is hurting the Aussie dollar.  That may be true but only to a small extent.  There are much bigger factors in play as well, and the dollar strength is probably the biggest.  So when the dollar finally falls, it is likely that the AUD will strengthen.  I will be sad.  Aussies here will be happy!

Here is a 20 year chart of the AUD vs USD.  You can see that the fall of the AUD against the USD, since 2012/2013, corresponds closely to the rise of the USD vs. the peso in the previous chart.

Here is the 20 year chart of AUD vs. peso.  You can see the peso is more volatile.

You can see that during the 2008 financial crisis, the AUD plunged, then recovered until about 2011, when it plunged again, until 2016.  After recovering again until around Jan 2018.  For the last 18 months, the AUD has been falling against the peso.  Whose fault is that?  If I knew, I would be making a lot of money trading currencies!

Here is a good explanation of factors impacting the AUD and the AU economy:

https://www.rba.gov.au/education/resources/explainers/exchange-rates-and-the-australian-economy.html

In my opinion, the biggest factors in determining a currencies trend are the decisions made by the country's central bank.  Those decisions have the biggest impact on monetary policy.  In the U.S., the central bank is supposed to operate independently of the executive branch, and does so most of the time.  Of course, a leader can try and influence monetary policy, but with limited success.

For those that make broad statements on another government's policy impacting their pension, and saying it is FACT, I suggest more homework is needed.  Currency trends are not so simple.  And sometimes, a country's central bank is going to make decisions that are right for the country, but very bad for an expat from that country.  That is just the way it is.  A strong currency is not always desirable for a country at a given time.

 

[Old55]

Impressive details thanks for sharing this Don.

[Ram1957]

Here's a forecast on what the Peso could do. 

https://longforecast.com/usd-to-php-today-forecast

[GeoffH]

I must admit... I've been used to getting around 40 peso to the AU$... with it getting down to around 35 peso it's starting to bite.

I don't think the recent central bank interest cut and the talk of 'is Australia heading for a recession' will help rates either.

[OnMyWay]

2 hours ago, Ram1957 said:

Here's a forecast on what the Peso could do. 

https://longforecast.com/usd-to-php-today-forecast

I hope that is right but if I knew for sure I would be buying futures contracts!

[Arizona Kid]

8 hours ago, OnMyWay said:

I hope that is right but if I knew for sure I would be buying futures contracts!

I've been through the highs and lows since 2002 when I retired here. If memory serves the peso was as low as 57 to the dollar to as high as 39. I've always adjusted my lifestyle to whatever the rate is. It's just something that you have to do. 

[Jack Peterson]

8 minutes ago, Arizona Kid said:

was as low as 57 to the dollar  Visa versa I guess you mean

9 minutes ago, Arizona Kid said:

to as high as 39.

 

[jimeve]

Very low pre 1980s Just had a look at GBP and the US$. 20 pesos and less, 1960s was low as 10 pesos to the GBP. Philippines must have had high inflation in those days.

[OnMyWay]

20 minutes ago, jimeve said:

Very low pre 1980s Just had a look at GBP and the US$. 20 pesos and less, 1960s was low as 10 pesos to the GBP. Philippines must have had high inflation in those days.

It is all relative to the cost of goods at the time.  I just looked at 1995, the first year I visited PH, and you got around 25 pesos for a dollar, less than half of what it is now.  Yet everything here seemed dirt cheap at the time, compared to the U.S.  I remember calculating that a San Mig cost me about 13 cents USD on that trip, I think.  Does that sound right?

And I see that 1995 was around a bottom for the dollar peso rate.  It went up from there until the 2007/2008 financial crisis.

[Ram1957]

27 minutes ago, OnMyWay said:

It is all relative to the cost of goods at the time.  I just looked at 1995, the first year I visited PH, and you got around 25 pesos for a dollar, less than half of what it is now.  Yet everything here seemed dirt cheap at the time, compared to the U.S.  I remember calculating that a San Mig cost me about 13 cents USD on that trip, I think.  Does that sound right?

And I see that 1995 was around a bottom for the dollar peso rate.  It went up from there until the 2007/2008 financial crisis.

When I was stationed at Clark 77-80 it was 7 plus pesos for the dollar during that time period.