It’s a common scenario lately: you go to transfer money to family or friends back home, and suddenly the $100 you’re sending over is resulting in less money for your loved ones — even though it was more valuable last week. Or, on a better note, the $100 you regularly send is suddenly giving your family more money than ever.
It’s frustrating, annoying and most of all confusing. So what’s going on with the exchange rate these days?
What’s happening?
The largest factor impacting exchange rates is that the US dollar is strong. Despite what we consistently hear about financial chaos — including inflation, rising interest rates, a possible recession and more — on a global scale, the dollar is the strongest it’s been since 2000. This is the result of the Federal Reserve implementing several measures to try and curb inflation with increased interest rates. When interest rates are high, the currency becomes stronger, as it becomes more appealing to investors who can yield a higher return.
But the dollar’s strength doesn’t have a one-size-fits-all impact on foreign currencies. Each currency is impacted by a range of factors that are unique to their location, leadership and position in the global economy. Which means if you send money to friends and family in different countries, you might notice different trends.
Here’s how the dollar is impacting a few different currencies around the world.
The Mexican Peso (MXN)
In Mexico, the exchange rate for the peso has stayed mostly flat — and has been even worse in value at times. Currently, $1 equals approximately 20 Mexican pesos. This exchange rate has been as low as 6 pesos to $1 in the 1990s, and hovered around 10-15 pesos to $1 between 2010-2015. In 2020, it spiked to nearly 25 pesos per $1. So why today, as the dollar is gaining strength, is it not buying more pesos?
That’s due to a few factors. On August 11, the Bank of Mexico raised interest rates for the 10th straight time as Mexico also looks to curb inflation. When this happens, investors buy up currency, meaning the peso has withstood global pressure better than most other currencies.
Secondly, with global supply routes disrupted and wars decimating cropland, countries that used to turn to Ukraine, Russia or China now need to look elsewhere for things like oil and metal — some of Mexico’s main exports. This is helping boost the Mexican economy.
So what does this mean if you’re sending money home to Mexico? Well, in short, don’t expect exchange rates to change drastically in the coming weeks. It’s all very complicated, and much of it depends on if the U.S. economy enters a recession or not. But for now, it’s business as usual. Fortunately, you can always trust Pangea to help you send more to Mexico.
Philippines
If you send money to the Philippines, you may have noticed every dollar you send is going a lot further. Currently, $1 equals around 55 Philippine pesos — near the currency’s all-time high, which was reached in 2004. But while the U.S. economy is strong, projections for the Philippines aren’t as sunny.
Because it’s an island, the Philippines imports more than it exports. It’s spending more money than it’s bringing in while battling a large food-inflation problem due to supply chain issues and rising fuel costs. It all combines to create a perfect storm in which the peso lowers in value, making essential goods more expensive.
While the Bangko Sentral ng Pilipinas — the Philippine Central Bank — recently decided to help curb inflation by raising interest rates, the peso is expected to continue to weaken and everyday goods will increase in cost. This all means that loved ones in the Philippines will be more dependent on remittances than ever.
The Euro
The dollar and the euro are just about equal in value (called “parity”) for the first time in 20 years, as the European currency has lost major value. This parity is due to a few unique factors: a potential recession, energy prices due to Russian sanctions and new lockdowns in China, which is a key trading partner for Europe.
Though prices for hotels, flights and other costs have increased, with this exchange rate, you’ll pay almost 15 percent less on purchases than last year at this time. So if you’ve been stashing away travel funds to see loved ones in Europe, now might be a good time to go.
The Takeaway
Currency rates are complicated, but by paying attention to the news and keeping an eye on trends, your hard-earned dollars can go as far as possible when sending money abroad. And if you’re ever in doubt, you can trust that Pangea always offers low fees and industry leading rates, helping your loved ones get more each time you send.
