Upward devaluation: the dollar against other Latin American currencies

A scenario of David against Goliath against the threat of inflation and the rise of the dollar. Advantages and disadvantages of the increase in the price of the US currency

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LatinAmerican Post | David Rivadeneira Soto

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Leer en español: Devaluación al alza: el dólar frente a otras monedas de Latinoamérica

The devaluation of many currencies worldwide against the dollar, so far this year, has several factors as a cause. Still, within them, there are certain aspects of the internal economies that cause this difference to widen more significantly from one country to another. For citizens in general, who are not experts on the subject, it is difficult to understand in a simple way what the dynamics are that make currency values move, but it is possible to feel its effects on the pocket in the daily life of households.

According to expert data from the Bloomberg agency, the Latin American currency with the greatest devaluation against the dollar so far this year is the Argentine peso, with just over 33% below it, followed by the Colombian peso with almost -17% since the beginning of 2022, and in third place the Chilean peso, carrying a little more than -12%, all this data with a cutoff date of October 21. In order, some of the countries south of the Rio Grande border that is still on the scale of relationship with lower value against the US currency are Bolivia, Peru, Mexico, Brazil, and Uruguay.

How Long Will It Last?

According to Andrés Langebaek, an expert in economic studies at Grupo Bolívar, assured the newspaper La República, it is a complicated task for analysts to be able to anticipate the value of the dollar in a day or a couple of months, and this also depends a lot on what is decided at the within the United States on monetary policy. From this perspective, uncertainty is what reigns, despite some forecasts, such as that of Felipe Campos, in charge of investment strategy for Alianza, also in statements for the newspaper La República, in which he expresses that it is most likely that the rise continues than in the remainder of the year and for the first quarter of 2023.

The inflationary increase has been knocking on the doors of all the countries of the world, thanks, above all, to the increase in interest rates made by the Federal Reserve with the intention of curbing this inflation trend, the highest that the United States has faced in forty years, according to the analysis of different specialists in the economy consulted by the Spanish newspaper El País. To this difficult cocktail must be added the complexities produced by the war between Russia and Ukraine, which increase the conditions to maintain economic volatility for a while.

Tips In Times Of Devaluation

Amid the volatility of exchange prices and devaluations of local currencies, there are some advantages for those who obtain profits and income in dollars. For example, those who carry out the export business of locally manufactured products and receive their payments in US currency, for them it is a time with advantages when it comes to collecting. However, trade is more complex because if it is manufactured with imported components or inputs, these will impact the price chain in the end.

Within the advice of financial and stock market experts for these times, it is recommended to save in dollars if possible. On the other hand, investments in equities will be a good option for times of devaluation crisis. Andrés Moreno, the financial analyst for the newspaper La República, explains that it is important, for those who are viable, "to buy shares that are listed in the United States." It is not necessary to handle large sums of money to carry out this type of transaction since there are currently different digital platforms that facilitate the task of investing in the stock market.

However, for the ordinary citizen not familiar with this type of financial movement to make investments, at this time a viable option is to generate income, either through remote work or through electronic commerce paid in the currency. American. In any case, given the constant fluctuation of the dollar against currencies around the world, especially in Latin America, with a tendency towards local devaluation, it is necessary to remain calm and for the governments of each country to make macroeconomic decisions that mitigate the effects of uncertainty.

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