Exchange Rate- Esgra & Quimsing BSA 2-2

EXCHANGE RATEPESO - DOLLAR

ESGRAQUIMSING

EXCHANGE RATEPrice for which the currency of a country can be exchanged for another country's currency.

Source: http://www.businessdictionary.com/definition/exchange-rate.html#ixzz3ouCXfPVM

1 US Dollar = 45.796 Phil. Peso

Source: Bangko Sentral ng PilipinasTreasury Department

Currency DepreciationA decrease in the level of a currency in a floating exchange rate system due to market forces.

1 US dollar = 45 phil. Peso 1 US Dollar = 46 Phil. Peso

Peso depreciation means that one of the currencies called pesos -- which is the currency in several former Spanish colonies, including Mexico -- have decreased in value compared to one or more circulating currencies.

When the Philippine Peso depreciates relative to the US Dollar, goods in Philippines become more competitive on world markets because their price when exchanged to dollar will be lower. The result will be an increase in Philippine exports.

Currency AppreciationAn increase in the value of one currency in terms of another.

1 US dollar = 45 Phil. Peso

1 US Dollar = 44 Phil. PesoCurrencies appreciate against each other for various reasons, including capitol inflows and the state of country’s current account.

When the Peso appreciates relative to the Dollar, the Peso becomes less competitive. This will lead to larger imports of goods and services of US, and lower exports of Philippine goods and services.

DEMAND• Demand works on the value of currencies in much the same way as it does on goods and services. All things being the same, the value of currency rises when demand for it rises and falls when demand falls. Peso depreciation could have come about as a result of less people wanting to hold onto the currency.

SUPPLYChanging supplies of currencies work in the same manner on their values as it does on goods and services. Having more of the currency available on the money market results in its value falling while having less results in its value increasing. Governments can manipulate the supply of their currencies through buying and selling government bonds. A peso depreciation could have come about as a result of more pesos flooding the market.

Graphical presentation of appreciation and depreciation of peso

The USDPHP spot exchange rate specifies how much one currency, the USD, is currently worth in terms of the other, the PHP.

Actual 46.18Previous 46. 02

Factor affecting exchange rates

1. Inflation Rates

2. Interest Rates

3. Country’s Current Account / Balance of Payments

4. Government Debt5. Terms of Trade

6. Political Stability & Performance