2009 proved to be a volatile year for a lot of currencies – specially the pairs with USD as one of the component, but the cross currency rates like SGD/INR showed relative stability. The pair has moved between 32 and 33.5 over the past 2 years.
The question a lot of you would be asking is what happens in 2010? So here is my analysis.
I expect SGD/INR to turn towards 32 to 30 range over the next 6 months to a year. A look at the chart below would show that the pair failed to stay past 34 mark even though it crossed it once. The pair has been hovering betwen the 33 – 33.5 mark for past 6 months.
The Singapore Monetary authority has been maintaining a policy of gradual appreciation of SGD against the USD. This has been giving SGD strength against the INR as well (SGD/INR) being a cross rate. The latest economic data shows that the Singapore GDP shrank by 6.8% in Q42009. This would force the MAS to rethink about the strong SGD approach. The most likely scenario is for SGD to move to the 1.45 – 1.50 range against the USD. traditionaly the MAS has allowed SGD to strenthen against basket of currencies with growth in SGD.
Indian economy on the other hand has been performing well and the projected growth in GDP is 6.5 to 7.5%. With improving GDP numbers and growth in economy the INR should strenthen back to its long term mean of 44 – 45 against the dollar. Using these two assumptions we can plot the projected move of INR against SGD.
Cross Rates between SGD/INR based on possible values of SGD/USD and INR/USD
The cells in dark green indicate the current range of SGD-INR depending on the rates of SGD and INR against the USD.
The cells in dark blue indicate the possible rates as the currencies re-adjust giving a range of 31.9 to 32.75 (this is the short term expectation – for next 3 to 6 months)
The cell is amber indicate the longish term range as the growth gathers steam over next 1 year.
So as always – I would recommend converting converting SGD to INR at any rate above Rs.33 for a Singapore dollar.