The Exchange Rate: Do’s And Deceptions

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Photo of a US 100-dollar bill and some Filipino currency intimating the exchange rate

Exchange Rate: Money For Something

The exchange rate is easy to understand. It’s basically how much of one currency can be purchased using another currency. As I write this, one US dollar can buy 51.42 Philippines pesos.

That rate is very important to expats. Most of us have to trade money from our homeland each month for Philippine Pesos to buy food, pay bills and live life. 

How expats use the exchange rate differs from person to person and what their needs are.

Three Ways To Exchange Money

Cash On Hand

Some expats have money from their country on hand already. They take their foreign money to a money changer of their choice when they need to. There they exchange it for Philippine Pesos. The money changer often makes a profit by giving a lower rate than the official one. The money changer may give ₱48 for every dollar if the rate is ₱49. They make ₱1 for every dollar exchanged then.

Depositing In A Bank

Other expats have money in bank accounts in their original countries. These expats write a check each month for deposit into their Philippines peso bank accounts. Their local Philippine bank sends the check to the foreign bank for payment and after their local bank receives the payment here in the Philippines, the local bank converts it to pesos. The best exchange rate is usually found at banks.

Some expats also have a local bank account in the currency of their homeland. They write checks from their foreign accounts for deposit into their local foreign currency accounts. Then they exchange their foreign currency for pesos themselves. Either way, it takes about one month for the checks they write to “clear”.

Using An Electronic Transfer Company

A third way that expats exchange their foreign currency is with a money transfer company like Xoom or Western Union. With some of these services, a person can walk into a shop and send cash money anywhere in the world. Some other money transfer services are electronic-only.

With an electronic transfer company, the expat’s bank account is connected to the transfer company. The expat tells the company how much to transfer, the company deducts it from the expat’s foreign bank account, sends it to their financial clearinghouse partner and the partner sends it to the Philippines. If the expat is sending it to a person, the person can either pick it up at a transfer partner (banks, pawn shops, some stores) or the sender can have it delivered to the person in cash. Another option is to have the money transferred into a local bank account.

The electronic transfer company makes money by charging a fee to transfer money, and by giving a lower exchange rate than the banks have set.

The Deceptive Exchange Rate

Exchange rates are deceptive, though. They don’t really tell the whole story by themselves.

Some people see that one US dollar is worth 51 pesos and they think everything must be really cheap here in the Philippines.

Well, some things are cheaper here than in the US. But a lot of things cost the same or are even more expensive.

Meat In The Philippines

Meat here in the Philippines can be cheaper than in the US, depending on what you buy. For instance, pork is a good value here but steaks are often more expensive because they generally come from other countries.

Looking at an online ad from a supermarket in Seattle I used to shop at, I see that chicken breasts are about US$6 per kilo. Last week we bought chicken breasts at “big box” store S&R and they were US$4.53 per kilo. That makes chicken breasts US$1.27 (₱65) cheaper here in Davao than they are at a store in Seattle.

Electronics In The US

On Lazada, a Samsung Galaxy Tab A 7″ is US$208. On Amazon in the US, the same tablet is US$128. The same tablet is US$80 (₱4,000) cheaper in the US!

Because the US market is so big (and so hungry for gadgets), prices for electronics are often lower and the selection is often better than in the Philippines.

You Booze, You Lose

Booze is cheaper in the US, for the most part. Locally-produced hooch is less expensive than imports, obviously. And many foreign brands of alcohol are not available at all.

A 750ml bottle of Evan Williams Kentucky Bourbon is just US$13.99 at a local liquor store in Seattle. I bought a bottle of the same whiskey at S&R a couple of weeks ago for US$17. Not a big difference, for sure but more than ₱150 more expensive.

History And The Exchange Rate

Historically, the heyday of the dollars-to-pesos exchange rate was in the mid-2000’s. At the end of May 2004, the US dollar hit its all-time high against the Peso at ₱58.18.

These days, the rate hovers around ₱50 with some experts thinking it may go to ₱52 by the end of 2017.

If you’re interested in seeing how the Peso and the UD dollar have compared over history, check out this Peso performance chart: Chart.

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2 Responses to The Exchange Rate: Do’s And Deceptions

  1. Mark October 16, 2017 at 12:11 AM #

    When I last went to Europe I could go to an ATM and pull money from my account in the US in euros at the bank exchange rate (atm fee of course) can you do that there?

    • JD October 16, 2017 at 12:34 PM #

      Hi Mark!

      Yes, you can withdraw from your US account in Philippine pesos at a local Philippine ATM. There may be some smaller banks with ATMs that don’t allow it, but the larger bank ATMs do. As you say, you’ll be charged a bank fee from the Philippine bank and possibly another fee from your own US bank.