Category Archives: SGD INR

Forex, Remittances, SGD INR

SGD INR: Unexpected Rupee Weakness

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The sudden weakness in the Rupee has caught most of us by surprise and has caused Rupee to cross the 45 mark once again agsinst the Singapore Dollar.

I was expecting the pair to face stiff resistance at 44 mark and not breach the 44 mark any time soon (Sgd Inr expected trend till end of June 2013). The rationale being that SGD and INR would both move in tandem against the USD which would make SGD INR a stable pair.

However SGD strengthened very quickly from the 1.27 mark against USD to 1.25 in a matter of few days on its safe haven appeal with the fear over slowing global growth and Fed reconsidering the pace of Quantitative Easing (QE). My expectation was for SGD to touch 1.28 before starting to strengthen again

Indian Rupee (INR) on the other hand weakened against the USD with rising Gold Imports and expanding deficit and is nearing 57 against the USD as I write.

Its worrthwhile to look at the long term Implied Interest Rates trend line for SGD INR with such sudden changes

SGD INR Jun 2013

Its quite evident from the trend line that everytime SGD INR has crossed the trend line it tends to reverse back to the mean. Every cross over is a good opportunity to convert to INR for investment or other purposes.

Market rumours suggest INR would touch the 58 mark against the US dollar which could see SGD INR crossing the 46 mark which for me would be a great level to convert.

My suggestion as always is convert in small amounts to average out your conversion rate as its not possible to catch the top and bottom of any market.

Finance, Forex, SGD INR

SGD INR: Expected Trend till End of June 2013

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We are well into second quarter of the year and its time for an update on the SGD INR projection.

Even with my best intentions to share thoughts on the pair as early as April its only now that I got sometime. Neverthless there have been some interesting developments in the past weeks which can impact the movement of the pair and its a good time to try and ascertain the trend in light of these.

On April 13 2013 the MAS maintatined its tight monetary policy stance even though the GDP unexpectedly contracted in the first quarter of the year and On 3 May 2013, the Indian Central bank lowered the key rates to 7.5%.

There was a expectation that with slowing GDP growth the MAS would allow the SGD to weaken against the other currencies and the USD-SGD might touch 1.28 mark. However with the inflationary pressures the monetary authority decided to keep the band and slope of policy bank unchanged.

On the other hand the RBI lowered the rates to boost growth in the slowing Indian economy.

Both the events are positive for the respective currencies and though INR has remained around 54 mark to USD, SGD moved from lows of 1.25 to 1.23 after the news.

With both the currencies showing some strength the SGD INR pair would remain stangnant in the 42-44 band. The pair has formed a strong resistance at the 44 level and I do not see it breaching this in the next few months.

With slowing growth the SGD might march back towards the 1.25 mark which would push the SGD INR pair towards the 42 levels.

So if you are looking to invest in India then a exchange rate of 43.5 – 44 would be a good rate to use

Finance, Forex, Remittances, SGD INR

SGD INR – Expected Trend till Mar 2013

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Its hard to believe that we are already in February of 2013 and that calls for me to keep up on my promise and share with you my thoughts on SGD INR movements in the near term.

The trend so far has been inline with what I had expected in Dec 2012 – The pair has maintained the range of 42-46 with a downward bias (Read more: SGD-INR: How does 2013 look like?) and trades at 42.99 as I write.

SGD INR made multiple attempts to breach the 45 mark but have been unsuccessful. In the meantime a few interesting developments have happened on the fundamental front.

RBI came out and cut the rates by 25 basis points to stroke growth and the financial markets have taken a more “risk on” approach. The former would result in NRE deposit rates being lowered in the long term and the latter would attract FII in to the Indian Markets chasing growth.

At the same time the Indian Finance minister has promised financial reforms and started with reducing the fuel subsidies which helps reduce the Indian Budget deficit. This is also positive for the Rupee.

On the SGD front the currency has lost 2% against the USD and now trades at 1.24 as compared to 1.22 late last year.

These factors combined have seen SGD INR soften below 43 mark.

The question which people ask often is that how low will the pair fall and will SGD INR reach 45 again?

My view is that in the short term the pair would increase and move to cross the Rs.44 mark – The US debt ceiling discussions are due soon and so is Indian budget for 2013.

The uncertainty on the policy front would result in INR weakening against the USD which would mean a weaker INR against the SGD.

The recent spike in Crude Oil prices would add to woes for Indian Rupee.

So in-case the recent drop of SGD/INR has left you scrambling like Oct 2012 then don’t panic – next few weeks should give you an opportunity to see the pair touching 44 again.

 

Enjoy the Holidays and wishing you a very Happy Chinese New Year!! Gong Xi Fa Chai

Forex, Remittances, SGD INR

SGD INR: How does 2013 look like?

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4 more days for 2012 to end and its a perfect time to analyse what would 2013 be like for the currency pair.

SGD-INR started the year 2012 at 41.28 and trades at 44.80 at the time of writing, a gain of 8.5%. The pair touched a low of 38.88 and highs of 45.11 during the year a volatility of appx 12%.

Let me take stock of how the past analysis has fared before delving into how the pair could move in 2013.
Continue reading SGD INR: How does 2013 look like? →

Forex, Remittances, SGD INR

SGD INR: Implied Exchange Rates

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Its been a while since I posted and SGD INR has gone on a see-saw ride since then :). People holding SGD against INR were taken aback the quick fall from 45 to 42 in a matter of days.

As always I stick to the strategy to convert and invest in Indian NRE accounts if you are happy with a 9% yield and have a time frame of atleast 1 year.

Here is the chart that gives the implied SGD INR rate based on Interest rates…Rule of the thumb is to convert whenever the Exchange rate stays above the Red line.

The current implied rate is 42.30Rs/$, which also is a strong support for the pair.

Having said that if Indian Govt follows reforms aggresively INR is bound to appreciate and the pair would breach the line downwards.

 

Forex, Remittances, SGD INR

SGD-INR: Expected to maintain 38~40 range post Budget

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The Indian rupee has moved within the expected range of 38.0 ~ 39.5 for the past few weeks as the Greek bailout unfolded and the Indian government presented the 2012 budget. As we near towards the end of first quarter its time to take stock of the old and new variables at play.

The Euro situation

It would be naive to say that the eurozone crisis is completely resolved. This is a temporary respite as policy makers try and reign in situations in Spain, Portugal and Italy which could spell bigger trouble. The general analyst consensus is for a weakening Euro. Any weakness in euro would be Rupee negative as it would impact exports

Interest rates in India

RBI paused the regime of interest rate hikes in its latest monetary policy statement. The tug here is between inflation and growth, the expectation is for RBI to start lowering rates in the second half of the year. Oil Prices as always would be a key here as a large part of foreign exchange outflows are used towards the oil bill. I am expecting rupee to move in the 48.5~51.5 range against USD for next few weeks.

One factor which could result in rupee weakness as a result of FII outflows is the new tax law that allows the Income tax department to charge corporations for past dealings.

Singapore Growth

The Singapore exports grew at a impressive 30% and another survey results highlighted Singapore economy to be most resilient of all Asian economies. This would attract investment flows into Singapore but the expectation is for SGD to stay around the 1.26 level against the USD.

Putting all these aspects together I am expecting INR to stay within the 38 ~ 40 range (widening it by 50p due to positives for SGD and INR negatives). The overall bias should still remain INR positive.

So my strategy would be convert at any rate above Rs.39.75 if you are looking to invest in India

Forex, Remittances, SGD INR

SGD INR – What’s in store for 2012

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2011, what a year it has been for the global markets and SGD INR has been a party to it. The pair started the year at 35.10 and finished at 40.74 a rise of 16%. However the pair has resumed the downtrend and is trading at 39.30 as I write – a drop of 4% from the year-end close.

Let me highlight how the past analysis has fared before delving into how the pair could move in 2012.

In the first post of the series on 23 April 2011 SGD INR – Has anything really changed the recommendation was to convert to INR and invest in deposits. The exchange rate was 35.50 on the date of writing and my recommendation was it could touch 36.5. this target was achieved on 30 May 2011.

The pair continued to move along the interest rate parity line and Tax Adjusted rate line for next 6 months before Rupee began its downslide in Sep 2011 due to weakening economy, uncontrolled inflation and financial turmoil in the global markets.

As Rupee slid from 48 to 54 against the US Dollar (USD) in the next three months its slide against the Singapore dollar was 37 to 41 – drop of 10% against either currencies.

When SGD breached 39 the prediction was for it to ride the momentum and cross 40 SGD Breaches 39 mark, Eyeing 40.

The prediction came true and Rupee went all the way to 41. In the post on 27th Nov 2011 the prediction was made for a pull back with pair ranging between 38.75 – 39.06 40 breached, What’s Next  which is on track as the pair is moving towards the 39 mark.

In the mean time a very interesting development happened as Reserve Bank of India (RBI) deregulated the NRE deposit rates to boost foreign currency supply in the market Now NRE Deposit yield 9.25%, and yes its Tax Free.

Having looked at all these factors here is my take for 2012 (stay tuned for updates every quarter, its very difficult to take a long term view in such volatile markets)

  • INR should strengthen against all currencies and SGD would be no exception.
  • On an Interest rate parity analysis SGD converted to INR and invested in an NRE account would grow to 43.25 in a years time at todays conversion rate of 39.5. The Rule I follow is to convert whenever the actual rate is above the implied rate line
  • With NRE deposits becoming tax free repatriating money in and out of India is easier
  • With Rupee strengthening the gains should be compounded for any investments made in INR

So unless you feel that SGD is headed towards a Rs45 mark in the next year investing in INR is sure to yield good return.

 

Forex, Remittances, SGD INR

SGD breaches the Rs.39 mark, Eyeing Rs.40!!

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SGD breached the Rs.39 mark in the interbank market today. Its been a volatile past few days with swings of around 5% with a downside move from 38.4 to 37.25 (3% downside) and then back up at 39.05 (upside of 4.9%).

The key events to have taken place in the plast few days have been a depretiation of SGD to 1.30 from the highs of 1.20 against the USD before the MAS policy meeting and then swing back to 1.26. The reason for the downmove was a possibility of MAS reversing its stand on strengthening SGD. However MAS indicated that it would allows gradual appreciation of SGD against the undisclosed basket of currencies making the slope of the curve less steep.
On the other side INR depreciated to 49.2 from the 45 mark – thanks to the undecisiveness in the global markets.

An obvious question that comes to mind is that can SGD touch the Rs.40 mark – I would say quite likely. All that needs to happen for the move to happen is some more chaos in the global markets. A weakening of INR to 52 against USD and SGD to 1.30 would result in a Rs.40 mark which is a 2.5% move from here.

Alternatively SGD could move to 1.25 and INR to 50 to get the same result.

But for either scenarios to play out there has to be increased uncertainity in the global markets. I would say hold on to SGD , if you already have, for next 2 weeks – you just might get a Rs.40 conversion.

Forex, Remittances, SGD INR

SGD/INR – Has anything really changed??

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Its been almost a year since I wrote anything on SGD INR or for that matter anything else. With the rate hovering around 35 there have been quite a few requests for me to express my views and here is my opinion.

How has the Past Analysis fared?

In my last post  (10th May 2010) I had recommended that converting SGD to INR at 33+ mark as it is beneficial based on Interest Rate Parity:

  1. Interest Rate on secured deposits  in India was 8% or more making conversion attractive and
  2.  The expectation was a downward movement from then rate of 32.4 against one SGD to Rs.30 giving additional gains

The first part of analysis held good but the rate moved opposite  – towards the Rs. 35 mark.

The instant question that comes to mind is Did I lose if I converted to INR instead of holding SGD’s?

The answer is NO. As per recommendation the pair moved to 33.29 within 2 weeks of recommendation on 21 May 2010. One Dollar coverted to INR @ 33.29 for 1 year and invested @ 8% would grow to 35.95 which is less than todays interbank rate of 35.85

Whats the recommendation for upcoming months?

I am going to stick with my recommendation that converting SGD to INR is beneficial in all situations and one would not loose by repartriating money to India and parking in fixed deposits.

The Interest Rates have strenghthened to 9.5% as of today and conversion has become even more attractive. To substantiate – lets say we convert 1 SGD @ 35.85  now and invest @ 9.5%, it will grow to 39.25 in one years time. Would SGD INR touch 39.25 in one year? Unlikely!!

SGD INR rate is a cross between USD-INR and USD-SGD for which the current rate is 44.25 and 1.235 respectively. For SGD INR to fetch 39.25 in a year the USD-SGD would have to move to 1.13, assuming that there is no change to USD INR.

Consensus on the street is that USD-SGD could move up to 1.19 by October 2011. Even if INR weakens to 46 against the USD the possible rate would be  38.65 after a year which is lesser than what you get by investing in a Fixed Deposit.

How do I decide when is a good time to convert?

Exchange rates do not move linearly and with the volatility its difficult to know if its a good time to convert. Also at the request of few readers I have added the dimension of taxability of interest income @ 30%. The below graph shows the movement of SGD INR for the past 2 years.

Two important observations are:

  1. SGD INR has stayed below the Tax Adjusted Implied Rate (TAIR) line except 2 occasions
  2. Its beneficial to convert to INR whenever the actual rate moves away positively from the TAIR.

On 13 Sep 2009 the TAIR was 32.94 and Actual Rate was 33.94, Actual Rate moved back to TAIR of 33.01 on 4 Oct 2009. On 30 Jan 2011 the Actual Rate was 35.81 against the TAIR of 35.49 and the two converged to 35.53 by 6 Feb 2011.

The chart below shows the prediction based on curent exchange rate of 35.85, Interest rate of 8.5% till 30 June 2011 and 9% after that till 31 Dec 2011, tax of 30% and Start of Year Rate of 34.96:

 

The expectation is that with the Singapore elections on 7 May 2011 the SGD might appreciate quickly towards 1.19 against the USD giving a possible rate of 36.5 in next 2 weeks. If this happens you know what to do!!

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Update – 30 May 2011

The Interbank Rate moved up to 36.55 today – target achieved. There is a slight possibility of the pair flirting with 37 levels but 36.5 is a good rate to convert.

 

Forex, SGD INR

SGD INR – Volatile Times Ahead

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A quarter of the year has passed since I last wrote about SGD INR and it is satisfying to see the analysis going right – the pair dropped below 32 in the first quarter.

I did not realise that I happened to be one of the few who write about the pair and recently a lot of people have been asking my views on the pair given the new financial turmoil stirring up on the horizon.

Before going into details lets enumerate the factor variables and conflicting forces active at this point in time.

  1. The Euro precipitation due to crisis in Greece.
  2. Flight from Emerging Market investments as a risk aversion
  3. MAS’s decision to let SGD appreciate against the basket of currencies to reign in inflation
  4. China’s indication on letting Yuan strengthen
  5. Recovery in US economy and its impact on USD.

Add to it that SGD INR is a cross pair determined by movements of SGD/USD and USD/INR.

USD/INR

USD/INR dropped below the mark of 44 a few days back and has since sharply recovered. The long term mean for the pair has been the 44-45 mark with fluctuations of Rs.5 either side. The pair would continue to strengthen as the Indian economy grow and there is Foreign Direct Investment. With the greece crisis stirring up there is bound to be some profit taking in the Indian markets by FII and flight of capital outside India. This would result the pair moving towards the 46.0 mark as a knee jerk reaction.

Further more with EUR depreciating the USD – there will be added strength to USD which would indirectly work in favour of USD/INR marching upwards.

However with Yuan appreciating against the USD some of the USD strength against all currencies would be negated. 

SGD/USD

This one is a more complicated pair to analyse. The singapore economy has shown good growth in the first quarter and the pair has gradually strengthened to below 1.40 levels. The MAS has shown intent to let the SGD appreciate against a basket of currencies.

No one knows for sure what is the composition of this basket – but USD and EUR definetely are larger components. There is a posibility that Yuan might be added to this basket if not already a part of it or get a bigger weightage if its already there.

With currency appreciation a way to reign in inflation the pair might edge back to 1.35 though this movement would be gradual. On the flip side a strong currency makes exports cheaper for Singapore – both services and manufacturing and government might still want it to hover around sub 1.39 mark.

How the 2 impact SGD/INR?

Now with USD/INR looking to touch 46.0 and SGD/USD moving around 1.375 (taking mid point between 1.35 and 1.40) mark the cross rate would be 33.45 – with a lower and upper range of 32.80 ~ 34.07

I would recommend this retracement to convert SGD to INR before the long term trend of a march towards 30 resumes.