SGD INR flirts with 52, could it hit 55?

After a long hiatus I finally got some time to make a post, thanks to the followers for the prompt and encouragement.

SGD INR has been on a roll in the past 8 months and to be honest this move was long overdue. The Indian Rupee was grossly overvalued and just needed a trigger to correct. This time around the triage of rising oil prices, increasing fed rates & falling emerging market currencies led by Turkey and political environment turning less favourable for the ruling BJP led by Prime Minister Modi finally precipitated the Rupee.

Rupee was 47.5 against the SGD and 63.65 against the USD on 1st Jan this year. Since the start of the year the Rupee has fallen 11.5% against the USD and 9% against the Singapore dollar and traded at 71 against the USD and 51.75 against the SGD yesterday. Looking at Year to Date (YTD) values one might think that the move is extreme and Indian economy must have worsened dramatically during the year but the fact is that the currencies were slowly adjusting to the dollars rise over the past 2 years and rupee was irrationally holding its ground. I have often mentioned in my previous posts that strength of currency and national pride should not be linked and currency should follow economic fundamentals and why such a simple concept evaded the current Indian government is beyond my comprehension.

Delving a little deeper and looking at the currency movement from an academic angle and using the Interest rate parity, the Fed rates have moved up from 25 basis points to 200 basis points over the past 2 years. India increased its rates recently from 6% to 6.25%. The interest rate differential which used to be around 6% has now come down to 4%. One might say that should have resulted the rupee falling by only 2% (6% – 4%) but why the big fall?

The answer is that rupee was fundamentally over valued. At the start of the year the REER (Real Effective Exchange Rate) index stood at 118 which simply means that the currency was 18% overvalued against a basket of currencies. The index currently is around the 110 mark. Which indicates that even after the correction the rupee remains overvalued. Now does that mean that rupee could fall another 10% against the US dollar? The answer is, theoretically yes! but will it happen in real, I don’t think so.

How does the rest of the year look like against USD?

The Fed is on a war path to increase interest rates and I expect at-least 2 more hikes over next 9 months before they take a breather. Oil prices have stuck around the US$75 mark and the expectation is for the oil demand to boost prices to US$80 to 85 a barrel range. The shock would have been severe had the world not been investing in alternative sources of energy. The US economy has been doing exceptionally well and the unemployment is at an all time low, EU has also started to improve with lower unemployment. After effects of BREXIT are still a concern and the ongoing trade war between US and the rest of the world doesn’t look to stop any time soon.

I think that the USD INR has a little more room to drop and will stabilise around the 72-74 range, another 2 to 4% decline from current levels. RBI has been smart to not defend the rupee unnecessarily and burn through the reserves learning from the actions of  the other central banks and is in the market to just smoothen the rupee’s fall. However,  better than expected GDP figures published on 1 Sep should lend temporary support to the rupee.

What does it mean for SGD INR?

Singapore dollar has been less impacted by the strengthening USD and MAS has allowed the currency to strengthen to neutralise the increasing US interest rates. USD SGD has hovered around the 1.35-1.37 mark.

If the fundamentals in the market deteriorate dramatically, USD SGD could touch 1.40, however if the oil prices increase and the inflation, specially housing prices don’t cool down the currency could strengthen to 1.30.

The SGD INR range that I see for the rest of the year would be between 50 to 54, with a bias to stabilise around the 52.5 mark.

India has elections due next year and this currency weakness would be welcome by the ruling party, which has a large support amongst the overseas Indian community to have foreign donations resulting in bigger rupee conversions. This is not very different to what happened in 2014 when the rupee had depreciated to 53 against the SGD in Aug of 2013 and then slowly recovered as elections approached in 2014. I am pretty confident that the trend will be repeated this time around.

Finally, coming to the crucial question of will rupee touch 55? I don’t think so.

Should you convert now and remit to India or wait? this is dependant on individual circumstances though I personally like to keep funds invested in Singapore.

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64 thoughts on “SGD INR flirts with 52, could it hit 55?”

  1. Hi Aditya,

    Do you invest in SRS? I did some research and found it is really useful for foreigners to save tax, especially those whose income is above 80k. I wish I knew this 10 years back, I could have saved so much money, since it can be withdrawn after 10 years. Anyways, I am starting from this year. Would like to know your thoughts.

    Cheers!

    Like

    1. Hi Deep. I don’t think that will happen. Even if sgd inr goes below 51 it would be a short blip. The overall risks of a global recession are increasing and India cannot stay immune, Infact a currency depreciation might work better in Indian economy’s favor
      Cheers

      Liked by 1 person

  2. Hi Aditya,

    Want to transfer 70k SGD to my India bank account. I see Instarem offering good exchange rate comparing to others.
    is this still good time to do transfer ??? i’v got house registration at Bangalore by End of this month.

    any thoughts?

    Akshay

    Like

    1. Hi Akshay, do compare with Transferwise, on last check they had the best rates. Also check for the transfer limits, some banks might require extra paper work for larger amounts

      Thanks

      Like

    2. HI Aditya,

      Thank you so much. i’ve other question to ask. Sorry for posting in wrong blog.
      Have taken balance transfer approximately 50k SGD from few banks here in Singapore.

      The house am buying in Bangalore is worth of 75 lakhs rupees(current guidance value for the flat) , My father and brother contributing around 40lakhs rupees as cash (Bank cheque). and i am transferring 35 lakhs rupees from here to my father account.
      Am not going for any housing loans in India, in total we are paying the 75 lakhs rupees cheque to landlord. (from father savings account)

      will there be any issues transferring money to my fathers account and paying for house buying? also new house will be registered on my name, where i don’t have TDS account in India currently.

      kindly advise me how to proceed further?

      Akshay

      Like

    3. Hi Akshay,

      Why do you not use your own account to pay for the house instead of using your father’s account as the property is in your name. For buying a property over 50 lacs rupees you need buyer and sellers PAN number, you don’t need a TAN number.

      Thanks

      Like

  3. Hi aditya,

    I have about 250k SGD into couple of accounts earning about 2% in SG. I am a bit conservative and looking at the market sentiments, I foresee a dive and plan to invest in ETFs when it crashes (maybe in 2 yrs). I am planning to lock-in 100k sgd (eqv INR) in IDFC FD @ 8.5 for 2 yrs. The exchange rate has dropped around 50. Any views on the movement in the next few weeks? Any suggestions on investment options? I am not a PR and hence not planning to buy Condo @20% stamp duty.

    Thanks in advance

    Like

    1. Hi Anuj
      I would expect the Sgd INR rate to stay flat around 50.50, there are increasing risks for SGD to depreciate looking at the global sentiments so unless the oil prices go up dramatically, I don’t think SGD INR will cross 51.50 in next 3 months.
      Over the period of next 2 years SGD INR should be around 53 so do take that into consideration when investing in IDFC Fd. Given how the markets move on tweets these days its hard to predict anything long term (fundamentals go out of the window when tweets come in :))
      I would have suggested SGD denominated Indian bond funds around 3 months back but they have appreciated around 5% since. They are still not a bad bet and could yield around 5%p.a. over next 2 years. Fundsupermart has a few by UTI and HSBC.
      Staying cash rich or in fixed income securities is the way to go

      Like

    2. I am also similar boat as Anuj. I have accumulated about 300K SGD now. I think Indian equities havent gone up much. Midcaps have corrected a lot, so I am planning to invest in Indian equity funds in Fundsupermart. I just put in 50K on Friday. If markets fall during Oct- Dec, I will probably put in another 50K. Lot of Asian markets have actually not gone up as much as US markets. So there are opportunities, if you are in it for the long term.

      Like

    3. I don’t like Indian equity markets, they are too expensive. Indonesia, Thailand, Vietnam, Phillipines offers a better opportunity. Indian debt funds are good as another interest rate cut is expected and they offer a YTM of around 6% which is not bad

      Like

    4. BTW, stamp duty or ABSD is now 25% and not 20%. I have stayed in Singapore for 10 years now. Looking back, even with the 20% I should have bought a house, In 2009, when I came here there was no stamp duty and downpayment was 10%, but oh well, who can predict the future.

      Like

    5. Hi Aditya, UTI fund based in Singapore seems to have be caught into some toxic assets. I just check it has fallen 8% YTD! While HSBC and Aberdeen are up over 10%. Poor investors who went with UTI.

      Like

  4. Hi Aditya,
    Any comments about the recent budget? Indian bond yields have fallen and Rupee has become stronger. With this strength continue? Maybe this needs a new article by you 🙂

    Cheers!

    Like

    1. Hi Nitin,

      The rise of Indian bonds was expected. The govt has been very vocal about RBI delivering rate cuts which the new Governor has delivered. I think at max there is one more rate cut on cards which should result in some more gains for Indian bonds. As with rupee there would be a short term strength maybe over next 2 months as monsoon unfolds. If the monsoon is good then rupee will strength further else fall back to 71 against the dollar.
      As for sgd inr, 50 will remain a strong support. I don’t see it giving away that easily.

      Like

  5. Hi Aditya,

    I have some NRE FDs with icici maturing. Initially I was thinking of repatriating them to SGD considering fragile INR status. But now looking at the stability, I feel I should just renew the FDs. Currently I see HDFC has 3 yrs NRE FD interest rate at 7.4% and no penalty for premature withdrawal. Should I go for this? What is your view?

    Like

    1. Hi Nitin. It is a good time to lock in FD rates as I expect the rates to come down in next six months. You could try and diversify with IDFC where the interest rate is 8.2% for 2 year NRE FD

      Like

    2. Thanks Aditya,
      I have ICICI, HDFC & Yes bank. I dont have IDFC, so I guess I will just go with HDFC. Yes bank looks very shaky at the moment.

      Like

  6. Hi Aditya, what would be your analysis on the SGD/INR movement now that election results are in? Would it be prudent to place some idle SGD funds in a NRE FD or would it make sense to wait for a better rate?Eager to hear your views. Cheers

    Like

    1. Hi,
      Given the interest rates in India are set to decline its a good time to lock your funds in NRE Fd. Idfc bank is offering upto 8.2% for 2 years.
      Thanks

      Like

    2. Thanks for your reply. What’s your view on sgd/inr exchange rate at the moment ? Which way do you see it moving ?

      Like

    3. It should stay around 51 mark, there is a increasing chance of SGD falling against the USD due to trade war between China and US which would prevent SGD INR moving upwards

      Like

    1. Hi

      It will oscillate between 50-52 in coming days and can move sharply based on Election news coming from India

      Like

  7. Hi Aditya,

    What is your view now on INR after the budget? Are you worried about your Indian rupee exposure? Should we convert and bring back the money or do you think in the long run India will be okay?

    Cheers,
    Nitin

    Like

    1. Hi Nitin

      In my view if one is earning 7% or more on Indian investments then they are ok. I will leave the money in india and not bother too much with exchange rate fluctuations.
      My personal strategy is to get exposure to Indian markets through IDFC NRE account that offers 7% interest rate on savings and sgd denominated India specific bond funds. I think if SGD INR crosses 53.5 it would be a good time to convert and invest or buy india bond funds.

      Liked by 1 person

    2. Thanks Aditya, looking at the kind of scams and nbfc crisis going on in India, I really worry about our money there. There is no deposit insurance in India and people here tell me that is risky. In Singapore there is 50k deposit insurance. So relatively the risk we are taking with sending money to India we don’t get compensated. We get hit with depreciation as well as risk of capital loss.

      Like

    3. Hi Nitin

      Unless you are putting money in a cooperative or a small time bank the risk of loosing capital is minimal. Yes, there is very small deposit insurance however both government and RBI will not let a bank fail. NBFC and corporate borrowers are a different story. Choosing your bank carefully – DBS, HDFC, SBi etc should poose near zero risk. I like IDFC for some small exposure as the savings interest is 7% from where money can be withdrawn easily anytime.

      The deposit rates in Singapore are lousy but one can get 2-3.5% on savings with Uob and Bank of China.
      Rest investing in equities, gold and collectibles is a good idea. Having enough liquid cash to jump in when market falls is a must.

      Liked by 1 person

    4. Hi Aditya,
      Regarding deposits in Singapore, I compared them and finally went with ICBC step up deposit for 1 yr, it gives me 1.95% with flexibility to break it in between and still get interest until that point. I dont intend to have credit card spend as criteria so I ignored most of those that have conditions. I also have DBS multiplier as my salary account and that gives me 1.9% returns but only upto 50k balance with just nominal credit card transaction.

      Cheers!

      Like

  8. Hi Aditya,

    Now I have about 40% of my money in SG and 60% in India. I dont have SG PR and may have to eventually go back to India. I am planning to still keep most of my money outside India. The recent INR strength has got me excited again to move some money back to SG. I have about 23L in Yes bank(which is about 6% of my networth), which I am jittery about, the remaining is in ICICI bank. So I am planning to repatriate that 23L to SG. ICICI is charging about 2.3% over the spot rate i.e. 52.10 for outward remittance, when the spot rate is 50.80. But I think I will still take it. I will continue to invest in global etfs like I have done or may be just keep it in SGD for sometime. Any thoughts?

    Like

    1. Hi Nitin,

      I think that the premium Indian banks are charging will stabilise once the Rupee stabilizes. There is a chance for it to touch 50 and bounce back from there this week. Transferwise from what I know offers a much better rate for both transferring into and outside India. I think it’s 1% to move money out of India, could be lesser.
      You could check them out.
      There are some india focussed debt funds in Singapore that you could consider to invest the money if that’s an asset class you are looking at.

      Like

    2. Thanks Aditya. Transferwise allows only INR to USD. Also limit is 3.5L at a time and it is very new. There is another provider also called. https://remittance.fxkart.com/
      But these guys dont know the concept of NRE. The FXKart guys do for resident Indians LRS and ask for kyc and stuff. I dont think they are designed for seamless NRE transfer. I could get into trouble using these services. Have you or any other NRIs used them to transfer from NRE account?

      Like

    3. Hi Nitin, I have used transferwise from Singapore and find their service seemless. I haven’t personally tried to transfer out of India, but do know that DBS india also has decent rates.

      Like

    4. Thanks Aditya, you are right, DBS and even Kotak rate is 51.80. SBI is 51.70. The worse are ICICI and HDFC both 52.10. But now I have no patience to open account with DBS, so I guess I will have to make do with ICICI. I will watch the rates for the next couple of days.

      Like

    5. That’s precisely why I don’t deal with ICICI, never have, never will, I have always found them pretty bad with hidden charges and unreasonable fees. Dbs is pretty good. Can open account in less than a week though if you want to try

      Liked by 1 person

  9. Hi Aditya,

    Trend now going downward for SGD INR. What you think rupee again getting stronger? Do you anticipate it to go up, oil price now going down, Iraq issue is also resolved.

    Thanks
    Deep

    Like

    1. Hi Deep,

      Sgd Inr peaked at 53.90 and any rate over 52.5 was a good rate to transfer. In the short run, ie December SGD INR could get close to 50. There will be general Usd weakness in Dec and the Rupee downfall can start again on the back of election results in India.

      Like

    2. I dont think it will go below 50 in 2018. 2019 will be volatile with a lot dependent on Indian elections and possible US elections.

      Like

    3. Hi Deep

      It’s market reacting to drop in oil price however the political risks remain. I do expect volatility to persist. If you are looking to transfer then 52 on a bounce is a good number and even investing in India focussed debt fund in Singapore is good

      Like

    4. Thanks Aditya.
      I never invested in funds in SG while pretty familier of India MF market. Could you please highlight any good Debt fund for direct investment in SG i.e without broker.

      Regards
      Deep

      Like

    5. Hi Deep,

      I do not know if investing directly with mutual fund companies is possible in Singapore. The 2 funds I like are HGIF India Fixed Income fund and India Fixed Income AM 30 fund

      Like

    6. Hi Aditya – Thanks for your earlier feedback. Yesterday OPEC decided on oil export restrictions resulting into increased crude oil price. The impact seen on exchange rates.
      I just wanted to know is this just a momentory impact ? And other factor like India current political scenario would take precedence? I did not see much of a impact on INR post recent RBI noise?

      Thanks
      Deep

      Like

    7. Hi Deep

      Given the recent electoral losses and change of RBI governor, I think the govt will want the rupee to be stable with a bias to strengthen. Unless oil gains significantly we should see Rupee at 71-72 mark against USD and SGD around the 52 mark.

      Like

  10. SGD INR crosses 53 and quite likely to move towards 54 quite soon as soon as oil prices increase in November after sanctions on Iraq. Thoughts?

    Like

    1. Hi Sriram, I think that SGD INR might touch 54 within Oct and if it does that one should look at investing in NRE deposits. Nov being Diwali govt might want to announce some relief, by way of duty cuts, if the oil continues to rise.

      Like

  11. Hi Aditya. Nice post…although after long wait 🙂

    I agree with most of the points you made in the blog except one on the INR depreciation being welcomed by ruling party before elections next year.

    Many factors like fed rate hikes, good global growth, higher GDP growth in India and higher oil prices will put an upward pressure on inflation which government can ill afford pre-election.

    Knowling the indian voters, they focus more on inflation no matter how rosy the GDP numbers may seem.

    Besides, I also have the same query as Sriram on US FCNR FD strategy. Would it be good move ? Awaiting your post on it.

    Like

    1. Hi Punit,

      Elections in India are fought with money and its the urban voters who care about issues like inflation. Rural India its the money might and political donations go a big way towards it. But yes i do agree that the govt does not want runaway inflation and the hope that weaker currency boosts exports and creates employment which has been a chronic issue.

      Thanks

      Like

  12. Thanks Aditya for the insights. Would converting SGD into USD and deposit in FCNR fixed deposits for the next 2-3 years be a good idea if we intend to stay in Singapore for the near term? And would you recommend indian banks or Singapore banks to do the same.

    Like

    1. Hi Sriram, good question. I am analysing the payoff and various scenarios and will post on it in next one or two weeks. Stay tuned

      Like

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