What happens when the dollar loses value against the peso?
Although the drop in the exchange rate (dollar-peso) is not good news for families that receive remittances in dollars from their relatives residing in the United States, the “chelitos” yield less for the national economy, has its advantages and disadvantages.
A disadvantage is presented in the attraction of direct foreign investment because, for investors, the dollar, a universal currency, has a significant advantage over the local currency since, this way, their money reaches higher levels of investment.
Likewise, it is convenient for tourists who come to the country whose currency has more value, and they can have more money available to enjoy.
The increase or decrease of the exchange rate also affects, positively or negatively, the commercial exchange, public debt, production costs, financing, and private debts.
Since mid-2020 and due to the economic crisis that the Covid-19 pandemic has generated, we have seen that the dollar exchange rate has fallen in the country from RD $ 58 per US $ 1.00 to almost RD $ 56.00 per US $ 1.00.
When analyzing the issue with the economist Arturo Martínez Moya, he refers that the exchange market is a market like any other and that the exchange appreciation occurs due to the more significant growth in the supply of dollars compared to the increase in demand.
He explains that the current outlook in the country could change if the United States Congress does not approve the investment program proposed for US $ 4.5 trillion, but he says it will, even if it is for a lesser amount.
The economist points out that this appreciation the Dominican peso has experienced against the dollar has the following positive effects :
- The weight is strengthened.
- Increase savings in local currency.
- Demand for dollars for speculation and precautionary purposes is reduced.
- Family savings and investment in local currency are preserved.
- The increase in the Consumer Price Index (CPI) is controlled.
- The excessive loss of the worker’s actual salary and his purchasing power is avoided.
- The increases in the price of fuel and imported food are counteracting, are on the rise, and the forecasts are that they will maintain the upward trend.