Category Archives: SGD INR

Forex, SGD INR

SGD INR – whats in store for 2010

Leave a comment

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. 

 

 

 

 

 

 

 

SGD-USD movement

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.

INR-USD movement

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.

Advertisement
Forex, SGD INR

SGD/INR whats happening with it?

6 Comments

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!!

Forex, SGD INR

Even Better time to convert your SGD to INR

3 Comments

With the recent volatile movements in the Currency markets and substantial weakening of INR against the USD here are some more analysis on SGD/INR conversion.

The latest USD/INR rate in the interbank market stands at 51.75 (3 March 2009, 3:00 GMT), this is a appx. 4.5% deprecaiation since the last post. SGD on the other hand has depreciated by appx. 2.0% against the USD – from 1.517 to 1.556.

The trend shows a beta of appx. 2 between the depreciation of INR against USD as compared to SGD against USD.

The latest market buzz is for the INR to depreciate to Rs.54 against the dollar on a conservative basis and Rs.56 on a pessimistic basis due to balance of payments situation, falling GDP growth rate and overall withdrawal of Foreign Direct Investment.

 This would translate to a depreciation between 9% to 13% from the rate of 49.5. If the beta factor holds then the SGD should depreciate by 4.5% to 6.5% from the base price of 1.517. This would give a range of 1.585 to 1.615 against the USD.

Using the cross rates the SGD/INR should be in the range of 34.06 to 34.67, resulting in movement between 3% to 5% from the current price of 33.06 over a period of 3 months – if Rupee depreciates further

The interest rate gain for three months would avg 2% [(9% (indian Fixed deposit rate) – 1%(singapore deposit rate)/4] so even if rupee weakens down to 56 against the dollar you stand to gain 5%-2% = 3% if you hold for three months and 1% if it touches Rs.54. Given the interest rate diffrential and probability of more than expecetd weakening of SGD against the USD (beyong 1.617), it is a even better time to convert SGD to INR

Finance, Forex, SGD INR

Right time to convert your SGD to INR

3 Comments

The Singapore dollar has held a pretty steady rate averaging Rs.32.25 / SGD in the past few months. We try to explore why borrowing in SGD and converting to INR is a good idea at this point in time.

The Historical Rate perspective
It first crossed the Rs.32 barrier mid July ‘08 and quickly retraced back around 10% to Rs.29.5 by mid August ’08. The SGD was quoting 1.35 and INR at 42.66 against the dollar, giving a cross rate of Rs.31.60 against the Singapore dollar as on 18th July 2008.
Then the financial crisis gathered steam and till date USD gained 11.37% against the SGD and 13.65% against the INR.
From the historical lows the USD has gained 22.65% against the Indian Rupee and just 11.37% against the SGD (sees charts below)

    usdsgd

  usdinr

 

 

 

 

 

 

 

 

The Economic Perspective
The Singapore economy has slipped into technical recession and the growth rates are projected to be within the 2% mark for 2009. India on the other hand projects a growth rate of 6-7% for the current year. In a nutshell the Indian economy is still growing which should result in a greater demand for Indian currency as compared to the Singapore dollar.

The Interest Rate Perspective

The average bank savings rate in Singapore hovers around the 1% mark as compared to 4% in India.
The long term fixed deposit rates for upto a year fetch appx. 2.5% in Singapore and 8.5% in India.
A one year return analysis will show that SGD against INR should move to 34.40 in a year’s time to maintain exchange rate equilibrium:
sgdinr-projection

 

 

 

Conclusion
Given the growth rate differential of around 4% between the two economies and the weakening of INR against the USD by twice as much as SGD, there is every probability that either the SGD will weaken further against the dollar or INR will appreciate against the USD to achieve equilibrium, by around 10% – giving a target rate of around Rs.30 against the Singapore dollar.
So if you convert your SGD to INR now you stand to gain:
         1. 14.67 % if the SGD/INR comes down to Rs.30 and you invested your converted proceeds in 8.5% Fixed deposit for a year in India
         2. 5.85 % if the exchange rate stays at 32.5 and you invested your converted proceeds in 8.5% Fixed deposit for a year in India
         3. 0% if SGD/INR moves to 34.40 (the probability of this is really low

Forex, SGD INR

SGD/INR Uptrend: Causes and impact on average Indian

1 Comment

SGD/INR Up Trend: Cause and Impact on the average Indian

The Singapore dollar broke its historic highs of Rs.29.63 (25th July 2006) against the INR on 24th April 2008 – the closing price that day was Rs.29.65 per Singapore dollar. A fairly range bound pair that oscillated in the range of Rs.26 to Rs.29.5 per Singapore dollar has been in an uptrend ever since.

The long term volatility remained at 5% which made this a relatively stable currency pair.

We will try to analyse the possible reasons and for this uptrend and the impact on the average Indian.

What’s causing this spike?
1. Inflation
The island city country imports most of the consumables from food to gasoline to clothes from neighboring and other countries. The steady price rise and demand supply imbalances in these exporting countries have created inflationary pressures. Singapore which has enjoyed a low inflation of around 2.5 ~ 3 % for last few years is now expected to face inflationary trends of up to 5%. The MAS (Monetary Authority of Singapore) has been forced to undertake a gradual appreciation of the Singapore Dollar to maintain the purchasing power parity of its nationals.

2. Reduction in the Dollar Peg
The Sing dollar was historically pegged against the US dollars but with the recent USD weakness the currency as now been pegged against a basket of currencies which has a reasonable Euro bias. The Euro has been strengthening against all major currencies thereby imparting strength to SGD as well.

3. Crude oil Prices
The unprecedented rise of the Crude oil price from US$ 53, 3 years back to the current prices of US$136 has also caused this range bound pair to move in the same direction.
Singapore imports all petrol and other crude oil products for its use. A simple analyses shows a direct correlation between the pair (SGD/INR) and the crude oil.

Table1. Co-Relation SGD/INR to Crude Oil
Co-Relation 3.5 years 1.5 years 6 months
SGD/INR to WTI 0.42 0.46 0.95

Chart 1: SGD/INR against WTI Crude (West Texas Intermediate – a type of Crude)

Impact!!
1. Exports
With INR weakening against the SGD, the exporters have all the reasons to cheer. Singapore just might be the platform for them in to the South East Asian markets.

2. Employed in Singapore
The Indian expatriate population in Singapore is around .25 million people and the rising SGD has brought smiles to their faces. The remittances to the home country are bound to rise but with the increasing cost of living the upside there might be limited. In a nutshell their remittances have been adjusted for Oil led inflation.

3. The Vacationer
Singapore has been the favored tourist destination for Indian’s but with the SGD having appreciated by close to 16% the holiday costs are on the upside. The Indian vacationers could start to limit their tours to Malaysia and Thailand as a result of these costs.

The Road Ahead…
The MAS has indicated to allow the SGD to strengthen against the USD up to 1.25 by the end of this year dependant on need to reign in inflationary pressures. The current rate is 1.36 and was 1.43 for USD/SGD at the beginning of this year.
If the USD/INR stays at the current levels of Rs.42.5 / USD the year end rate for SGD/INR could reach Rs.34 / SGD if everything else remains the same. Given that Oil is traded in USD and India is a net importer of oil the demand for USD should rise in turn pushing the USD/INR upwards.

The mathematical model encapsulating the above information indicates the SGD/INR movements with respect to crude Oil as tabulated below:

Crude Oil Price SGD/INR rate
80 27.92
90 28.29
100 28.77
110 29.38
120 30.11
130 30.96
140 31.92
150 33.01
160 34.22
170 35.54
180 36.99
190 38.56
200 40.24

SGD just might be your hedge against the rising Oil Prices!!

Copyright: Aditya Ladia, ACA (India), ASI (UK)
Sources: http://www.oanda.com and http://www.eia.doe.gov for data on Exchange Rates and Crude Oil.