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What are some significant political and economic events that have drastically affected the dollar to peso rates?

by admin   ·  March 7, 2024   ·  

Introduction

Political and economic events can have a substantial impact on the exchange rate between the US Dollar (USD) and the Philippine Peso (PHP). In this blog post, we will explore some significant events that have caused drastic fluctuations in the dollar to peso rates, shaping the dynamics of the currency pair.

1. Global Financial Crisis of 2008

1.1 Background

The global financial crisis of 2008 originated from the United States and had a profound impact on global financial markets. It was triggered by the collapse of Lehman Brothers, causing a severe credit crunch and a significant decline in investor confidence.

1.2 Impact on Dollar to Peso Rates

The crisis led to a flight to safety, with investors seeking refuge in safe-haven currencies like the US Dollar. As a result, the USD appreciated against most currencies, including the Philippine Peso. The dollar to peso rates saw a significant increase during this period, reflecting the global uncertainty and risk aversion among investors.

2. US Federal Reserve Policy Changes

2.1 Taper Tantrum in 2013

In 2013, the US Federal Reserve announced its intention to scale back its bond-buying program, known as quantitative easing. This announcement created a market panic and resulted in a surge in US treasury yields and a strengthening of the US Dollar.

2.2 Impact on Dollar to Peso Rates

The taper tantrum led to a significant appreciation of the US Dollar against the Philippine Peso. The uncertainty surrounding the Fed’s policy changes and the resulting capital outflows from emerging markets caused the peso to weaken significantly against the dollar.

3. Philippine Political Events

3.1 2016 Philippine Presidential Election

The 2016 presidential election in the Philippines had a notable impact on the dollar to peso rates. The election of President Rodrigo Duterte, who implemented various economic policies and social reforms, had both positive and negative effects on the economy.

3.2 Impact on Dollar to Peso Rates

The uncertainty surrounding the election and subsequent policy changes resulted in a volatile exchange rate. The peso experienced fluctuations as investors assessed the potential impact of the new administration’s policies on the Philippine economy. These events had a direct impact on the dollar to peso rates.

4. Trade Wars and Geopolitical Tensions

4.1 US-China Trade War

The ongoing trade tensions between the United States and China have had a significant impact on global markets, including the dollar to peso rates. The imposition of tariffs and retaliatory measures between the two largest economies has created market uncertainty and volatility.

4.2 Impact on Dollar to Peso Rates

As the trade war escalated, investors sought safe-haven assets, leading to an appreciation of the US Dollar against the Philippine Peso. The dollar to peso rates reflected the market sentiment driven by the trade tensions and the potential impact on the Philippine economy as an export-oriented country.

Conclusion

Political and economic events can have a significant impact on the dollar to peso rates. Events like the global financial crisis of 2008, US Federal Reserve policy changes, Philippine political events, and trade wars can cause drastic fluctuations in the exchange rate. Traders, businesses, and investors need to stay informed about these events and their potential impact on the currency pair to make well-informed decisions. By understanding the interplay between politics, economics, and exchange rates, one can navigate the complexities of the dollar to peso rates more effectively.

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