Forex, Remittances, SGD INR

SGD INR: 50 with SG@50?

138 Comments

Ever since the Prime Minister Modi came to power the feel good factor about Indian economy and India has increased dramatically. All Indians, including me, are rooting for improved Indian economy – infrastructure reforms, streamlining of tax code, improved law and order and not to forget getting back the black money stashed in overseas accounts. The expectation also is for the Rupee to strengthen as reforms kick in and help kick-start the much-anticipated economic growth.

The past few months have seen the pair oscillating between the 46-49 range and the volatility in the forex markets has been nothing short of a roller coaster ride. The pair dropped all the way to 46.5 after  the elections and bumped back up towards 49 only to test 46.5 again as the oil prices slid in the international markets (I was expecting a 45 floor as mentioned in replies to questions in the previous post).

SGD INR Dec 2014

INR has weakened against the USD to 63 as I had written earlier in (SGD INR: Post Election Euphoria) but interestingly SGD has also weakened in tandem. At one point in time the fall in SGD was greater as compared to INR and caused SGD INR to test 46.5.

Oil has fallen dramatically in the past few weeks and raised concerns of Central Banks not being able to meet their inflation targets prompting talk about monetary easing. A falling oil is good for India’s Forex reserves which has lent some support to the Rupee. On the other hand though the market sentiment remained weak as India’s trade deficit widened to one-and-a-half year high of $16.86 billion in November due to over six-fold jump in gold imports. Trade deficit in November last year was $9.57
billion.

The key events in play as I write are:

  1. Falling oil Prices and the rout of Rouble
  2. Bank of Japan’s push to achieve 2% inflation
  3. Expectation of FED rate hike in 2015

Falling oil prices can make the FED hold on to rate hike and also bring strength to SGD as the safe haven theory comes back into play. My expectation is for the Singapore Dollar to appreciate back to sub 1.30 level and Indian rupee to move upto 65 level which would bring the SGD INR back at the magical 50 mark in time for Singapore’s 50th birthday

 

138 thoughts on “SGD INR: 50 with SG@50?”

  2. Hello Aditya,

    I have 45K SGD to transfer, Seeing the market fluctuations , Iam holding my INR remit convert.. whether in end of nov or Dec, Is it possible for INR to go up of Rs.48…Please suggest

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  3. Hi Aditya,

    Nice blog.

    What is your outlook on the SGD-INR exchange rate for the next two weeks. It is surprising that the rupee is seen appreciating even after the RBI rate cut. Any major events you foresee would significantly impact the exchange?

    Thanks.

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    1. Hi Dinesh,
      It is indeed surprising that INR strengthened after the rate cut announcement but then again markets are strange and they might be closing open positions before the long holiday this weekend. I don’t see much movement in next 2 weeks unless the NFP numbers come very strong tonight. Indian manufacturing index was at few months low yesterday so I am not really convinced that INR is fundamentally strong.

      Like

  5. Hi Aditya,
    I took the risk and waited. But the rates are going down now.. What is the point where we can expect it to stabilize?

    Also what was the decision of MAS on the interest rates?

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    1. Rates should stabilise in a weeks time. The Fed decided not to increase rates. MAS has not done anything. However there is a RBI meeting on 29th Sep where a rate cut is widely expected. If RBI cuts rate then rupee could gain for 2-3 days then fall. However I would personally think that a rate cut by India should cause rupee to slide to 67 against the USD. But then again markets don’t always follow logic and fundamentals take a while to kick in.

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  6. Aditya, you were spot on with the 14th Sept week.. The rate has gone up and now hovering around 47.45. Is this the right time to convert?

    Thanks

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    1. Hi DevDeep, converting over next 2 days should be beneficial. The next key event is fed raising interest rates or not on 16/17 Sep. If the interest rate rises there would be extreme volatility in forex market both SGD and INR would fall against the USD, but if there is no rate rise then sgd should strengthen more than INR. So if you want to take some risk wait for 2 more days otherwise can convert now also.

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  7. Hi Aditya, I would like your suggestion on investment plan. I am holding SGD abt 70K. is it good idea to send to NRE account and FD the amount or are there any good investments in SG where we get considerable return. (I heard the FD rates are down to 7.9% now in NRE).

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    1. Hi Someone,
      The investment decision depends on your risk profile. If you want assured stress free returns invest in NRE. If you are looking. G for better returns could venture into mutual funds or bonds but it comes with higher risk. Aspial on issue was a good bond to invest in Singapore but that’s closed and I am not aware of any similar offerings available currently
      Thanks

      Like

  9. Hi Aditya ,

    I am planning to transfer 50k SGD to INR at good exchange rate . could you please advice whether i should wait few more weeks/months to get good rate or i should send it immediately at current rate which is 47.12.

    Many thanks for your suggestion

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    1. Yes. I have maintained all along that the rupee is grossly overvalued and maybe RBI needed a reality check that it’s ok to let Currency depreciate and not keep it strong by open market interventions. Finally it happened with China going ahead of the game.

      Like

    1. Hi Amay,

      I believe that the devaluation is fully priced in SGD but INR has more room to fall. That’s why you see SGD INR bouncing back up after the knee Jerk fall. I would be watching if RBI allow Rupee to cross 65 today or tomorrow. Once that psychological barrier is breached 67-68 against the USD will be possible by month end which in turn would push SGD INR to 47-48

      Like

  13. Hi,

    The sgd/inr rate has gone down to 45.68. Could you please share your opinion if its expected to go up to around 47 in next 2 or 3 weeks.

    Thanks,
    Amay

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    1. Hi Amay, I don’t see it moving up to 47 in next 2-3 weeks. The action on sgd front will happen after 12th Sep, speculated date for the upcoming elections.

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  15. INR wont fall as much as other currencies reason being commodity prices are falling. As India is an importer of commodities, INR is going to benefit from the commodities slump. As USD rises commodities like Oil etc fall even more, which is net positive for INR.

    As far as Singapore is considered. Its biggest trading partners are in big trouble, both China and Malaysia. I see no end to Singapore’s woes. Just read SBR.com.sg. So much of negativity on every economic front. Its just a matter of time before SGD falls.

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  16. Thanks Aditya, the info was helpful.

    I think USD has very tactfully placed its currency in the major traded product, major component is OIL. Therefore no country can dump the USD without bringing down its own economy.

    Forex reserves should cover the countries Imports, repayment of debts plus any contingencies. India has a negative BOT so it should always keep more reserve.

    Even Singapore being such a small Country beats India in terms of Trade Exports. India is just not Exporting enough and Self consumption is huge.

    China too went from 100 Bn in reserves in 1996 to 4 Trn in reserves in 2015, Is there any hope for India?

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  17. Yesterday Chinese market plunged more than 8% pulling the USD down along with its currency. My question is Indian Rupee depreciated more than the USD to give SGD a quick jump in the last two day, why did this happen? How deeply is India linked to USD. Because the charts show steady increase in USD against INR over the years.

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    1. Hi Devdeep,

      Did Chinese market really pull the USD down is difficult to say however one should consider the following forces at play:
      1. US fed is indicating rate increase which is dollar positive
      2. Earnings of US companies have started to hurt as the dollar has gained strength.
      3. If interest rates rise the cost of servicing a loan – be it house or car becomes expensive and can result in defaults if the global economy falters.

      On the other hand Singapore Dollar is eclipsed by a potential MAS easing in Sep.

      RBI in India is trying to remove volatility from the forex market and have a predictable USD INR rate. My personal view is that RBI wants to see Rupee decline in a controlled manner and build sufficient reserves to fight any market volatility. For a country like India 350 billion in reserves is not much and pales in comparison of 3.73 Trillion of China. Just imagine if a rout like Chinese Stock market sinking happened in India would RBI have enough money to prevent forex volatility due to FII selling?

      Now to answer how much is INR linked to USD – quite a bit. INR is a partially convertible currency and USD is still the preferred currency of trade. 2 of the India’s biggest imports – Oil and Gold are traded and settled in USD. Therefore if and when Fed would raise the interest rate INR would weaken against USD.
      My view is that SGD, AUD, NZD, CAD, MYR, THB have all weakened against the USD in tandem and INR is lagging behind. The weakness will come true its just a matter of trigger

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  18. The key thing is the figure called Exports as a share of GDP. In case of India the figure is only 25% and in case of Singapore it is 190%! So you see how important exports is for Singapore compared to India. So Exchange rate is a very very important thing for Singapore and not so much for India. With China slowing down, it has a big impact on Singapore. Rest of the world growth too is weak. In such circumstances, India is much better placed than Singapore.

    http://www.tradingeconomics.com/singapore/exports-of-goods-and-services-percent-of-gdp-wb-data.html

    http://www.tradingeconomics.com/india/exports-of-goods-and-services-percent-of-gdp-wb-data.html

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    1. I don’t think its a very sound conclusion
      1. Singapore’s has practically no natural resources so the GDP is bound to be from exports – be it services or manufactured goods.
      2. Singapore’s exports to GDP percentage has been around 200% mark for over 3 decades now and yet the Singapore dollar has appreciated in the same timeframe and
      3. India’s exports have risen over a period of last 3 decades as the currency has weakened.
      comprehensive data for all countries can be seen on worldbank website.
      http://data.worldbank.org/indicator/NE.EXP.GNFS.ZS
      A key differentiating factor here is India has a deficit economy and Singapore has a Surplus economy. What does that mean? Indian govt spends more than what it earns and relies on capital receipts and borrowings to make up for the shortfall. So the question still remains where will India get the money to spend on infrastructure and defence?
      Using the same logic countries like Australia (20% export to GDP ratio) and Japan (15% of export to GDP) should not be trying to weaken there currency to improve exports. There share as a percentage of GDP is even smaller than that of India.

      Liked by 1 person

  20. Canadian dollar is now at its 6 year low. Basic theme is all commodity exporter currency are getting worse hit due to falling commodity prices. Next in line are finished product exporters like SGD, CNY, Korean Won, JPY etc are getting hit due to low global growth. Best performers are internal consumption stories like USD, GBP and INR.

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    1. And where will India get the money to import oil, spend on defence and build infrastructure?

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  22. Also add to that the Iran nuclear deal, which has put a cap on oil prices. Oil is now unlikely to cross the 70 mark for a long long time, giving strong support to the Rupee.

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  23. Hi Aditya, Thanks for your insights. Please share your vierws on SGD-INR by July end. At the moment, it is around 46.50.

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    1. Hi. Two very interesting developments have happened over past 24 hrs. The US retail sales grossly missed the estimates and Singapore’s GDP came short of expectations. A miss in retail sales means that US interest rates rise might get delayed and missed GDP could result in MAS easing. The 2 news items have a equal and opposite impact on SGD and has resulted in USD SGD remaining flat. However rupee moved up against the USD due to less than forecasted US retail sales which impacted the SGD INR. I am expecting INR to weaken again after the knee jerk appreciation. Wait and watch for 2 days for clearer trend to emerge.

      Thanks.

      Like

  24. Hi Aditya, good to see your analysis/forecast on SGD-INR exchange rates and it helps many people like me. Thank you.
    I was waiting for SGD to hit 49-50 rupees for more than an 1.5 years where SGD was around 48+. Now i realised that should not have waited for it rather i could have converted them to INR and opened a fixed deposit in India through which i could have received the returns equivalent to the excahnge rate @50 rupees.
    So i have transferred 25K SGD during mid May at an exchange rate of 48 rupees… Later again the rate fallen down. I wanted to transfer 75K+ SGD at a good exchange rate(not less than 48). In view of my long wait and lumpsum amount to transfer, do you advice me to wait for few more months and do you foresee SGD-INR rate hits high(around 50) again in near future like what happend in 2013?

    Please advice if it is worth to wait as i waited for this long and i dont want to loose when excahnge rate is expected to increase.

    Thanks
    Prasad

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    1. Hi Prasad,

      I have always advocated transferring money in small chunks to average out the Exchange Rate as it is impossible to catch the top and the bottom of the market.

      From a medium term perspective I do not see the Rupee crossing the 48 mark in the next 2-3 weeks and doing the math every month you wait the opportunity cost is roughly 30-25 paisa in interest. So If I were to take the current exchange rate of around 47 in 3 months time money converted now would grow to roughly 48.

      I was advocating people to transfer money at any rate over 47.75 just a few months back and would recommend you to make a part transfer at 47.
      The Rupee has been uncharacteristically resilient and I expect it to resume the downward slide against the USD around last week of August. If you want to wait and take a chance I would recommend putting money in DBS Multiplier account or OCBC 360 account where you could earn an interest higher than the savings account.

      Like

  25. Dear Aditya,

    The sgd to inr rate has fallen below 47. Could you please provide your inputs if you think that it would rise in the near future.

    Thanks,
    Amay

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    1. Hi Amay,

      Yes, the rate would rise again and I expect it to fluctuate between 47 and 48, however 10-15 paisa either side of the above limit is also possible.

      Thanks.

      Like

  26. Hi Aditya.

    What’s happening with the market. Can we expect stable SGD/INR?? Before SG national day.
    Does it going to (SG50) creates any mark with SGD/INR exchange rate??

    The plunging euro: Good or bad for Singapore??

    Cheers

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    1. Hi Akshay,

      It depends on what do you mean by stable SGD INR. The currencies are expected to be volatile as the Greece saga unfolds. I don’t think there is any mark that MAS or any other body would be creating with SG50.

      A systemic devaluation of currencies across the globe would cause trouble for export oriented countries be it Singapore or India. They would not be competitive if they don’t devalue the currencies simultaneously.

      Cheers

      Like

  27. Hi Aditya,

    I see sgd is gradually appreciating, will this trend continue, is it advisable to wait or transfer now.
    I would be sending closely 50K SGD.

    can u please help me here.??

    Akshay

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    1. Hi Akshay,

      My recommendation is to transfer in chunks. It’s impossible to catch the highest price. Any rate above 47.75 is a good rate.

      Cheers

      Like

  28. Hi Aditya,

    I read this blog a month ago and holding some SGD to be converted to INR. I have no idea on market, tell me an opinion if i can still wait for August to send money? I would be sending somewhere around 20k by taking a loan. Thanks

    Regards
    Karthik

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    1. Hi Karthik,

      If you are taking a loan then I would recommend waiting. I am not very hopeful about the monsoon and the Rupee has to weaken sooner or later. However any rate above 47.75 is a good rate to convert.

      Like

  29. Dear Aditya,

    Thanks for your insight.

    Hi Nitin,

    I am just trying out interesting stuffs(getting my hands dirty).8900 is not much in terms of money but in terms of interest it is a significant amount. to earn 200$ in interest in Singapore i think you will have to keep 40k in the account for 6 months. Suddenly 40k is a lot of money (for me at least).

    Moreover whether SGD will rise or fall is 50% based on calculations and 50% on other environmental factors. History shows us that fall is always much fast than rise. So if SGD rises we are looking at 2% cap but if it falls, god knows where will it stop (from 49 to 45 in just one month). So am thinking will wait one month and if i don’t see any significant movement will go ahead with the transaction.

    Thanks and Regards,
    Devdeep

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  30. Taking a loan and converting only makes sense when the SGD is imminent to fall and you want to hedge the value of your future savings, in INR terms. Also it makes more sense if you want to take a loan for 1 year worth of savings and then the 8.75% Indian rates quarterly compounding gives close to 9.2% or something.

    At the current exchange rate and the small amount that your are talking about and also just 6 months duration, is really not worth the hassle. Rs 8900 is less than $200.

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  31. Hi Aditya,

    Thanks. That was the fear in my mind too.1,5% appreciation is very much possible in 6 months but the bank has offered me 5k at 0 interest and 125$ OTP charge. Which has confused me if i should avail this facility as i will have the liberty to keep the money for 2 months easily while waiting for a rate rise as the interest i can recover in 4 months in India. So the next two months is the decider.

    Whats your take on the next two months behavior of the rate. Is it likely that it will hover around the 46 range or will it go 47-48 or 44-45 range.

    Thanks
    Dev

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    1. I think your effective rate is 5.4% pa for the loan (I am assuming you have to pay monthly minimum instalments). The direction would be set by MAS policy meeting due for sometime in April. If I am reading the markets correctly market has already priced in no further easing from MAS and that’s what caused USD SGD to fall. If MAS does nothing then usdsgd should move to sub 1.35 levels which would be sufficient to push SGDINR to 46.5-47. Rupee should weaken slowly to 63+ and that should bring SGDINR closer to 47.

      Like

  32. Hi Aditya,

    Thanks for the Quick reply. But the 4% i was talking about is the net rate for 6 months i.e. 8% PA for 6 months. So i will get 8921.25 so roughly 231952.5
    So equivalent SGD = 46.39.

    So was asking is there a possibility that the rate can improve from 46 now to 47 in next one month or so. So that i can take advantage of the extra 1 rupee plus the interest.

    Thanks and Regards,
    Devdeep

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    1. Hi,

      The SGD INR would have to move to 46.7 for you to get 46.40 while transferring through banks. That’s roughly a 1.5% appreciation from the current rate and very likely. Though I think that you might get a better offer on the loan terms from citibank. Sometime back they had offered me 2.40% reducing balance with zero processing fee.

      Like

  33. Hi Dev,

    here is the Maths:

    Loan Amount – 5,000 SGD
    Upfront fee – 2.5% ~ 125 SGD
    Net Received – SGD 4,875
    Equivalent INR – 4875 x 45.75 = 223,031.25

    Invested in FD at 4% p.a. for 6 months
    Interest Earned – 4,460 Rs.

    Amount in INR at end of 6 months – 227,491.88

    Equivalent SGD INR rate at the end of 6 months for this transaction – 45.49

    So the only way you would stand to gain with this transaction is if SGD INR falls below 45.50 in 6 months time.

    Rest I will let you decide.

    Cheers

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  34. hi Aditya,

    I am getting a loan from bank @ 2.5% for 6 months. Is is a good deal if i take it and convert it to INR @ 45.75 current rate and invest @ 4% for 6 months FD while paying them off after 6 months from my earnings here?

    While it looks like a profitable transaction the Ex-rate exposure might mitigate the profit.

    Kindly suggest should i go on with this transaction or should i wait because the bank will take the 2.5% upfront.

    Thanks and Regards,
    Devdeep

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  36. It really depends on this Yemen conflict, I have said before that when there is heightened risk off scenario INR will fall or after that INR will rise. Make use of this opportunity to convert your SGD to INR, if your holding a big chunk.

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  37. hi aditya,
    i see sgd is gradually appreciating ,will this trend continue?>,is it advisable to wait or transfer now.

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    1. Hi,

      I think SGD can appreciate to 1.36 against USD and Rupee depreciate to 63.5 against USD. So you could look to transfer around 46.5-47, but remember if you have loans then clear them out first irrespective of what exchange rate is

      Like

    1. Hi Ajeet, do check out my latest post. It was good to see that the chief economic advisor shares the same view as me and has recommended that we should weaken rupee whenever possible.

      Like

  40. Hi Ajeet, I am not an analyst, my view based on reading other analyst reports. I cannot predict in the near term, but based on the reports I read, SGD is expected depreciate to 1.44 by the end of the year and INR is predicted to reach 63.5 by the end of the year. So you can see there is much higher downside potential for the SGD. Add to that INR interest rates are so high that if you convert now and put it NRE FD or savings account, you earn even better returns. Every month that you delay in converting you lose about 35 paise due to interest income lost.

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    1. Hi Ajeet,

      Yes the comments are conflicting because I believe that INR is overvalued and SGD has been oversold. I do expect SGDINR to move up in next 3 weeks time to atleast 46 level. In the 3 month period I still maintain it to move up to 47-48. However for people who have loans in India they should not wait for Exchange rate to improve at clear their debt first.

      Like

    1. Every central bank intervenes in the markets to smooth out the volatility – some through bond purchases aka QE like US Japan and now ECB or through open market operations like India and Russia and some through just statements and guidance like Australia. I believe that SGD is oversold by speculators and should continue to strengthen at least till the MAS meeting in April plus Indian Rupee is overvalued – even with oil at lows rupee has not broken the 60 mark…

      Like

    1. Hi Amutha,

      I don’t think SGDINR would go below 45 and there is every likelihood of it touching 46.5 in april. The deciding factors would the both RBI and MAS meetings.

      Like

  44. MAS’s website talks about the Monetary policy for those who might be interested

    “The MAS manages the Singapore dollar (S$) exchange rate against a trade-weighted basket of currencies of Singapore’s major trading partners and competitors. The composition of this basket is reviewed and revised periodically to take into account changes in Singapore’s trade patterns. This trade-weighted exchange rate is maintained broadly within an undisclosed target band, and is allowed to appreciate or depreciate depending on factors such as the level of world inflation and domestic price pressures. MAS may also intervene in the foreign exchange market to prevent excessive fluctuations in the S$ exchange rate”

    http://www.sgs.gov.sg/The-SGS-Market/Monetary-Policy.aspx

    Every Central bank manages the volatility in the Forex markets through open market operations or policy statements. ECB made statements around overvalued Euro, Australian Central Bank got the AUD to fall by calling it overvalued, Japan similarly called the Yen overvalued and resulted in its decline.

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  45. Hi Deepak,

    Singapore dollar is a pegged currency and it is pegged to a basket of trade weighted currencies. MAS intervenes in the currency markets on a daily basis to maintain this peg, instead of letting market forces determine the price of the currency.

    By selling reserves, MAS was buying local currency to reduce liquidity and inturn increase the demand for the currency local.

    Basically pegged currencies are extremely dangerous. Read more about how George Soros basically made the ECB bankrupt by breaking the pound’s peg to the German Mark.

    Interesting read!
    http://www.investopedia.com/ask/answers/08/george-soros-bank-of-england.asp

    India’s RBI intervenes in the currency markets only to reduce volatility when there is sudden appreciation/depreciation, but the central bank doesn’t decide the direction or the level of the exchange rate, we dont even have the kind of reserves to do it, even if we wanted to.

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  46. Hmm… In that case you can copy your existing one and edit it offline and repost. I will delete this one once you have reposted. Also please don’t use the line around artificial shortage. The comment can imply that central bank is trying to rig the market which is not true

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  47. @Nitin – RE : “Singapore is spending billions of reserves to prop up its currency, a report by DBS revealed.”

    Just curious to understand. Where this money is spent ? Isn’t it a normal phenomena used by central banks to switch between local currency and foreign currency reserves?

    Thanks,
    Deepak

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  48. Just read this article on SBR:
    http://sbr.com.sg/financial-services/news/billions-reserves-being-used-prop-weak-sgd

    *******************************************
    Singapore is spending billions of reserves to prop up its currency, a report by DBS revealed.

    According to DBS, Singapore’s reserves have fallen by US$34 billion since July, a trade-off of keeping the SGD on its appreciation path.

    “In six short months, reserves have fallen by the equvialent of 11% of a full year’s GDP. Little wonder the central bank eased back on the appreciation path in late-January, Further easing will be necessary if reserves don’t stop falling,” the report stated.
    *******************************************

    Now with Brent falling again below $55, I only see INR only appreciating. Anybody who has a huge amount in SGD and want to convert to INR, do it now! SGDINR has moved from 33 to 53, the fall to 45 is still not a lot, it could easily go to 40, once USD stabilizes and FIIs start investing in India.

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  50. Hi Aditya,
    Thanks for your quick response 🙂
    Eagerly awaiting for better conversion rate to transfer money to india.
    If there is no outstanding loan in india, can we still wait ?

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    1. Hi Saravanan,

      I would say 46-47 in next 3 months is possible and you could invest in money market funds or keep money in dbs multiplier account to earn some interest in the meantime

      Like

  51. Hi Aditya,
    Recently I came across this post and found very useful.
    Just three months ago, when USD2INR was around 63, SGD2INR also came up to 49+. But now also USD2INR is around 63, but SGD2INR dropped to 44+. If INR is getting stronger, then both USD2INR & SGD2INR conversion rate should go down right? Why only SGD2INR is going down?

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    1. Hi Saravanan

      Thanks for your kind words. The reason SGD INR is weakening is due to the fall in SGD USD which has moved from 1.22 to 1.38 in past 6 months. If someone asked me I would say MAS is very smart and forward thinking to let the Singapore dollar depreciate to help support exports and I think INR has to drop to 65 against the USD for India to remain competitive

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  53. INR has been amazingly steady so far. But if US hikes rates, SG will probably hike too, that could be a potential trigger for SGDINR to move upwards. Brent at below $60 is also giving lot of comfort for the INR.

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    1. I sense despair :/, but have patience and let the fundamentals play out. Sensex cracked 600 pts the other day and rupee dropped to 62.75 against USD. Rupee has to move to 65 over time against USD and that will get SGDINR to go up, but as I have often said if you have a loan outstanding in India always clear it down first irrespective of interest rate

      Like

  55. It looks more like dollar strength rather than rupee weakness, look at SGD, EUR and JPY, all have weakened in tandem with INR

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    1. Dollar strength or Rupee weakness it’s just two sides of the same coin 🙂 . The crux remains that the valuations on Indian markets are 20-22 times forward earnings which is higher than other regional markets and earnings need to improve for the valuations to be justified and for earnings to improve the pricing has to be competitive.

      Like

    1. There would be no impact on home loans. The prime lending rates need to come down for home lending rates to fall. I maintain that exchange rate needs to move towards 65 against USD and 47 towards SGD for Indian exports to remain competitive

      Like

  57. Hi Aditya
    Thank you for your inputs. I want to transfer a bulk amount to India for my home loans.
    Do you feel doing it now is the right time or wait for some more time.

    Thanks

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    1. Hi MK

      For transferring money towards a home loan you should transfer soon. The benefit of exchange rate improving compared to Interest outlay that you have is not favorable.

      Like

  58. Hi Aditya
    I read news on rumors of RBI going for a rate cut soon and also MAS to further ease monetary policy in next month. If this turns out to be true, then it looks like SGD is heading for weakening and INR towards strengthening.
    Do you feel SGD-INR may go below 45 in the coming days and do you see any scope for SGD to strengthen

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    1. Hi MK,

      Theoretically everytime a central bank cuts rates it should result in the currency weakening – Australia, New Zealand are good examples. In case of India one would argue that cutting rates would help with lower interest outlay and that should result in rupee strength but with service tax hike which will add to inflation should prevent RBI from drastic rate cuts. Even if there is a rate cut the RBI would not want rupee to appreciate specially when China is devaluing currency and with a strong rupee the government’s “Make in India” agenda would not be attractive to foreign companies. Speculators might want to create a artificial panic by buying rupee but I would like people to remember what happened to rupee when it went to 58 as BJP formed government only to slide back to 62-63. With recent rainfall and crop destruction I see headwinds for rupee.

      Thanks

      Like

    2. On the back of what I said earlier with a rate cut rupee weakened and closed down roughly 1/2 percent. The traders did push the sensex up and then it fell roughly 600 points from high to close in the negative territory. If I am reading this correctly the RBI governor wants a weaker rupee and a out of meeting rate cut might be an indication of that.

      Like

  59. I agree, this budget was kind of disappointing, but still its not going to change the dynamics of the rupee so much. Major factor is going to be, how FIIs who come out on Monday are going to play the markets. Saturday, Domestics investors kind of gave a thumbs up to the market, considering how it closed, although most of them hadn’t read the fine print, yet.

    If FIIs continue to buy and markets go up and oil doesnt suddenly shoot up, Rupee is going to remain strong.

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    1. The only way India can record 8% growth is through increased exports and for exports to be competitive rupee has to weaken. Strength of currency due to capital inflows in stock markets is a recipe for disaster. What is needed is robust reserves that come from increased domestic consumption and exports. I have been talking to friends who have been facing ever increased competition from China as the rupee cross rates have strengthened against the yuan as well which just makes them uncompetitive in the international markets

      Like

    1. Hi Amay,

      As expected there was nothing extraordinary in the budget. No big bang reforms or policy changes. Not even removal of duty on gold which was much anticipated. I maintain that with budget behind us the rupee would creep to 65 against the USD which would decide the course of SGD INR – I see it moving to 46-47 in next 4-6 weeks. One sign to watch would be advance tax collections for Q4.

      Thanks

      Like

  61. INR seems have to suddenly shot up just now and SGD has fallen below 1.36 making the SGD/INR precariously perched on the 45 mark. Infact Ajit’s DBS rate of 45.15 looks too good now.

    My bet, the budget is going to be a super hit. I expect some major break through announcements and markets should shoot up.

    Disclosure: I am fully invested in the Indian markets both debt and equities, so I am super bullish India and super bearish Singapore 🙂

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  62. Hi Aditya,

    I thought that it will increase by Feb end, but still it is decreasing more and more 45.15 DBS rate. Still you think Indian budget will make it around 47 or any chances to that it will go below 45.

    Whats your prediction?

    Like

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    1. Hi Ajit,

      Looking at the Railway Budget I don’t see the Union Budget to be full of surprises. There are a lot of expectations from people which finance minister would not be able to fulfill. I maintain my target of 65 against USD and 46-47 against SGD post budget (provided there are no positive surprises)

      Cheers

      Cheers

      Like

    1. Hi Amutha,

      With the current rate of 45.5-46 and 8-9% rate, even if you convert today the money would grow to equivalent of 49-50 by the year end.

      Cheers

      Like

  64. Hi Aditya,

    I need to convert sgd to inr to my NRE. Im waiting for SGD to come to 49. Is this possible by end of March? Pls suggest.

    Thanks

    Like

    Reply

    1. Hi Amutha,

      49 by end of march is unlikely unless the budget is a complete disappointment which I dont think the government will allow to happen given the recent loss in the Delhi polls.

      Like

  65. Hi Aditya,

    I have a home loan in India with 10.25 percent, which I intend to repay in full through my sing dollar saving. As can be seen that sing dollar is now in the range of 45.21 and 45.50. Do you see a further rise in the rate in the near future.

    Also, do you see that Indian budget would have an impact on the rate. Could you please advise.

    Thanks,

    Best Regards,
    Amay

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    Reply

    1. Hi Amay,

      I would suggest that you slowly transfer money to India, say in chunks of 5k to average out the rate instead of waiting for rate to go up substantially.
      Looking at at from a pure cost of money the SGD INR would have to move up by 40p every month for you to wait for the exchange rate to rise instead of paying off the loan.
      I do expect the Rupee to weaken post budget and ease towards 63 mark against the USD and move up to 46 against the SGD by end of Feb.

      Thanks

      Like

  66. Also to add to what Aditya’s comment, FD rates may be cut soon, as soon the cost of funds for banks fall. So if you want to lock in to the current high rates for long time like 3-5 years, now is the time to convert and book those FDs. NRE FDs are best, as you dont have to pay tax on them but NRE FDs are offered only for 1 Yr and above. NRO or domestic FDs are available for short term, but you will be taxed according to your income tax slab

    If RBI cuts rates further after budget, there will be more FII flows into Indian debt and equities and INR should appreciate despite the popular belief that currency falls when rates are cut. This happened during the last cut. Indian equity markets will also gain if there is a rate cut.

    Like

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    1. Hi Lakshmi,

      Yes, after the budget and leading upto monsoon. However do factor that if you converted now around 46 and put in fd for 4 months you would still earn roughly 1.25rs in interest so it would be a neutral trade off.

      Thanks

      Like

  68. RBA(Reserve Bank of Australia) just cut rates by 25bps and now the AUD has fallen to almost parity with the SGD. NZD has fallen even below that. Suddenly SGD is looking very overvalued against some of its peers. Expect further easing by MAS and SGD should now fall towards 1.37-1.40 levels to the USD, its just a matter of time.

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    1. Hi Lakshmi,

      No I dont think it will go to 42. I am waiting for the RBI governors announcement today and would not be surprised if he cuts rate by another 25 basis points to send a strong signal that currency is overvalued.

      Thanks

      Like

  71. Hi Aditya,
    I think the sgd to inr rate has slowly started picking up after the immediate effects of MAS policy change.

    As mentioned earlier by you, do you think if Rate should be around 45.5 to 47.

    Thanks,
    Amay

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    1. Hi Amay,

      I think SGD weakness was a case of sell on rumour buy on news. An extremely week sgd can create housing bubble. I maintain that SGD INR can move to 47 in next few weeks

      Thanks

      Like

  72. Hi Aditya
    Boss with Modi reforms n make in india moto of the govt what are the chances of rupee. Falling rupee after budget . Don’t u think rupee will fall more.

    Like

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    1. Hi Winston,

      Theoretically I agree with what you are saying. A relatively week currency or superior product is needed for the make in India campaign to be successful but market forces are almost always irrational. I think the rupee is fairly valued at 66 to a USD and that’s what I would expect it to be for robust growth in economy.

      Like

  73. Hi Aditya,

    I am planning to buy property in India end of Feb or start of March and i have to remit lumsum amount SGD to INR what you suggest that time will rate will be better. is any chances that it will come to 48 again.

    Like

    Reply

    1. Hi Ajeet,

      I think with the market focussed heavily on Indian budget i don’t think 48 is possible in 4 weeks time unless something drastic happens in the global market. Ofcourse if the budget is disappointing then rupee might go all the way to 50.

      Thanks

      Like

  75. Hi Aditya
    With the change in policy from MAS to reduce the appreciation of Singapore dollar , How do you see SGD to INR rate in the near future of say a month

    Regards
    MK

    Like

    Reply

    1. Hi MK,

      Central banks are going in for a currency war. First the swiss bank and now MAS. I think the market had already priced the change in policy in the past few weeks and I don’t expect much weakness from here on. The rate should stay around 45.5 to 47 for next 3-4 weeks.

      Thanks

      Like

  77. Hi Aditya,

    Thanks for your posts. They are indeed very useful and informative.

    The SGD TO INR rate has fallen drastically. Do you see it going up in the coming weeks.

    Thanks once again.

    Best Regards,
    Amay

    Like

    Reply

    1. Hi Amay,

      Thanks for the encouraging words. I believe that Rupee would remain strong until budget due to expectations of some strong measures and after that it should weaken towards 65 to USD. The driver for SGD INR rate this time around should be INR’s movement against USD.

      Thanks

      Like

  78. @Aditya – would be keen to hear more on your findings/recommendation.
    @Deepak – converting from SGD-INR now would mean losing money. Plus, don’t think the RBI interest rates will be revised by a huge margin, won’t you still lose money compared to waiting for SGD to rise up against Rupee?

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    1. Hi Aaditya (its a little awkward to address my ownself ;))

      The direction of SGD INR would be predominantly determined by USD INR, which if i were RBI would like to see at 65. Not because it gives me benefit as a overseas remitter but because it keeps indian exports competitive vis a vis other countries – Malaysia, Indonesia, Philippines, Vietnam, Sri Lanka etc…

      Like

    1. Hi Deepak,

      If you are going to invest in a fd then its always a right time to convert, however if you are converting due to recent fall and are fearful of further depreciation in SGD INR then I would say think again.

      Like

  80. Thanks Aditya, always helpful reading up your blog posts, And thanks Nitin – for sharing those articles.
    And agreed, I have been pondering over the same thought for some time now – if there are other better investment options available. But nothing seems as attractive as a guaranteed 8-9% return with minimal or no risk. Do you two gentlemen suggest any other options (mutual funds / stocks etc)?

    Like

    Reply

    1. I am shortlisting a few corporate bonds/debentures which would give a much better return than a FD but ofcourse taxation would have to be taken in consideration.

      Like

    1. Dont forget to deduct 2% conversion charges – 1% to convert to INR and 1% back to SGD. Though as I have always said converting to INR and keeping in NRE account is always a safe bet.

      Like

  82. Thanks Aditya, Fair points. I think, just like that article mentioned, this year India has been treated just like other emerging markets and there have been outflows from Emerging Market/BRIC ETFs of which India has been part of.Also there have been FII outflows from debt funds as they have made tons money due to yields on the govt bonds falling. I really hope next year, India will be differentiated out, especially if Russia becomes stable and oil hovers around this 60 mark, emerging markets as whole wont be under so much pressure.

    The key however though is, India cutting rates and US raising rates. This would definitely put pressure on the Rupee as there will be more outflows from debt funds as the yield differential will reduce. That is something to watch out for. So I agree with you, there are headwinds for the Rupee.

    If there are aggressive rate hikes in the US and aggressive rates cuts in India, the Rupee is screwed, especially if growth in India doesnt pickup and we have very bad deflation.

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  83. Hi Nitin,

    Thanks for sharing the Morgan Stanley recommendation. The key here would be how both currencies perform against the USD. The US GDP growth is almost similar to that of US and even with oil falling the Rupee has weakened all the way to 63+. Just imagine what happens once the Russia crisis is resolved and oil starts to move back up. Even though it is being potrayed as middle east trying to drive out US shale producers my take is that the falling oil price is a proxy war on Russia to cripple it financially and make it comply to US demands.

    Sorry not aware of any places that will give you cheap long term loans, the only thing you could use would be a 6 month loan that some card companies offer for 2-3%.

    Happy Holidays

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  84. On a related note, Aditya, do you know any ways of getting cheap SGD loans/leverage to do a carry trade of investing in NRE FDs at 8.75% interest for 5 years? I looked at personal loans, but the interest rates are high(~7-8%) and you can only borrow 4 times monthly income.

    I wish Singapore banks allowed us to take home loans on Indian property, that would have been awesome. They do allow for some countries, but not India 😦

    http://www.uob.com.sg/personal/loans/property/international_home_loans.html

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  85. Well, I think only in case of sudden risk-off scenario in the world, will the Rupee fall vs the Singapore dollar, like it happened for couple of days around Dec 17th. But return to normalcy is Rupee appreciating and SGD depreciating as is evident now.

    http://www.livemint.com/Money/TuH421DuTbLVzlpg15c4DI/Rupee-seen-winning-as-oil-plunge-roils-Indias-peers.html

    Quote from the above link:

    “Morgan Stanley says borrowing Singapore dollars to finance rupee purchases is one of its top 10 currency trades for next year”

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