SGD/INR whats happening with it?

Its been time since the last post on SGD/INR and a lot has happened in the currency market. Though surprisingly the SGD/INR rate has moved in the narrow range of 32.5 – 33.50.
The past few months saw SGD strenthening from 1.55 to 1.44 against the US dollar. Rupee on the other hand moved from 52.5 to 48.00 against the greenback.
The interest rates front has turned interesting as well – the central banks are not so focused on inflation and growth seems to have caught their attention once again. The rates have softened across geographies. The Interest rate in singapore for a long term deposit will average around 1.25% and India a long term deposit brings in 7% on an average (though the long term National Savings certificates still get 8% but the lock in is for 5 years)
In the light of the new data converting singapore dollars to Indian Rupees still makes sense.

Even if the Singapore dollar stays at 32.75 agaist the Rupee the gain turns out to the 5.6% and a chance of loss is only if the Rupee weakens beyond 34.60 against the SGD.

As earlier thats a unlikely scenario. The probability of Rupee strenthening against the USD to the range of 44 – 46 is extremely likely and that would see SGD INR heading down to Rs.30 levels. When will that happen is really difficult to say, but for the time being it still makes a lot of sense to convert SGD to INR (those of you who followed the post in the past must already be sitting on annualilsed gains of 5.6%).

If you want to go a step further then borrow in Singapore dollars – a lot of banks are running offers for 6 month loans for a effective rate of 3% p.a – and convert to INR.

Even with the interest lay out you stand to make near riskless gains of upto 3% or more!!

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6 thoughts on “SGD/INR whats happening with it?”

  1. Hi Nitin,

    The strategy has not been worng – The recommendation to convert was made in July 2009.

    Say you converted $1000 @ 32.75 – this would have given 32, 500 INR. Invest it @ 7% the then FD rate and it would have grown to 34,770 INR resulting in efective SGD INR rate of 34.77 (the market rate on 9 July 2010 was 33.81).

    On the date of your comment SGD INR was 34.28, Interest rates have ever since moved to 8.5 ~9.5 % range.

    So Unless you left the money in a savings bank account or idle there is no way you would have made a loss moving money to india as the money grown in india would represent a rate of 34.77 and you could convert at 34.28 resulting in gain of 50paisa per SGD.

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  2. Aditya!

    We have all been proved wrong. Look where SGD is and where INR is 😦
    Last year I used to converted all my SGD savings to INR every month. On an average I might have converted at 32.5. Now I am interested in buying a condo in Singapore and need to get convert back all the money that I have converted plus some extra money that I had earned in India to SGD. But the rate I am getting to convert is back is 35. 😦

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  3. Hi Aditya,

    I would like to know your cuurent views on the SGD-INR rate? its been pretty consistent on the 33-34 levels, what is your outlook for the coming 2-3 months?

    Appreciate your comments.

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    1. Hi Rohan, It still makes sense to convert SGD to INR, the risk free rate in a NSC is 8% and till the rate moves beyond 34.6 you stand to gain around 5% on a yearly basis.
      My expectation is for SGD/INR to ease out to Rs.30 over the period of next few months.

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  4. The strategy is predominantly targeted at the Indian’s employed in Singapore who would most likely be converting SGD to the base currency INR. Even after considering tax at a rate of 30% the post tax rate of 4.9% leaves opportunity to arbitrage atleast. 3.5%. NSC’s would fetch a higher return and tax rebates. I am considering anything over 1 year as a long term deposit.

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  5. Aditya, I’m not clear how do you say that Long term interest rates in INR is about 7% if the funds are treated to be fully repatriable, unless the funds are invested in INR on non-repatriable basis where one has to account for Tax components as well.

    Appreciate your thoughts.

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