Tag Archives: SGD/INR

SGD INR 55 Achieved, Target 57

SGD INR finally crossed 55 after appreciating 5% from the exchange rate in Nov 2019 – 52.60. Theoretically speaking you would have gained slightly more by transferring to India but after accounting for the transaction costs it might not have been much.

It stayed below the 55 mark as I had written more than 2 years back SGD INR flirts with 52 could it hit 55. That time i did not think it will cross 55 but now I am updating my SGD INR target to 57, yes you read it right, Fifty Seven!!

By when?

I expect this to be achieved by the end of the year and then the rate should slowly decline back to 54.5 leading upto the Indian Budget in Feb 2021

The rationale being that USD INR will touch 76.5 and USD SGD will move to 1.34 mark in the short run.

Why will INR weaken?

Inflation and rising COVID cases will make it hard for INR to appreciate, the fund flows on account of mega deals that Reliance Industries has been doing should come to an end and at some point the Foreign Institutional investors will book profits and withdraw their gains from the stock markets. RBI will smoothen then currency movements but given the inflation has very little room to tweak the interest rates.

Why would SGD strengthen?

Singapore is one of the last few countries that offer a positive interest rates on government securities and is politically stable unlike US or parts of Europe. This gives SGD bonds safe haven status and money comes in. The same thing happened in 2009-2012 when SGD rose to as high as 1.22 against the USD.

Does this only benefit SGD INR?

Next 6 weeks should provide opportunity across currencies – EUR INR could see 90, GBP INR 99 and USD INR – 76.5. So those looking to transfer can watch out for these levels.

Instead of waiting for absolute levels, I would plan for any transfers based on what is your end goal. If you are getting a high interest rate in NRE FD’s or other investments now then even current rate of 55.4 is a good rate. Each of us have different goals, tax status and risk tolerances. Therefore plan based on your needs and not get stuck at specific levels.

There are other options if you do not want to transfer the money to India and yet want to gain with the short term increase in rates, watch out for the next post.

Why Timing is So Important

While it maybe difficult to time any market timing does play an important role and could be the difference between ordinary and stellar returns.

Timing of transferring money to India and investing in NRE Deposits or any other investment vehicle could also mean the difference between a 3% compounded return vs returns of 7% or more.

To illustrate this, I took the money transfers I have done over the past few years and tabulated a return table. I factored in cost of transferring funds i.e. nett money received in India and also the cost of repatriating the money back on maturity and using today’s exchange rate

As you would see the return ranges from anywhere between 3% to 8%, even for transfers which were done not too far apart.

The best returns were achieved when the SGD INR rate was well beyond what fundamentals commanded – like in 2018 the fair value of SGD INR was around 52 and a transfer made at 53.3 generated a superior return

If the exchange rate moved favorably or stayed flat the returns went up. Return matrix using exchange rate of 54

Based on long term interest rate parity, i believe 54.5 -55 is fair value for SGD INR towards the end of 2020. So if the pair crosses 55 and banks are still offering 6% or more NRE FD’s then it would be a good investment to consider.

I would be keen to hear what your experience with generating stable returns in India has been

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.

Widget, widget on the wall, Which is the Best Investment of all?

Finally the tool to compare investment options is here.

Its configured for Indian Tax Rates for FY 2017 -2018 and works pretty accurately – I tried to test as much as I could but feel free to point issues if you find some.

To use the tool simply input your Investment amount and the Total income before this investment. That will calculate your tax bracket.

Then choose the category of investment and input your expected rate of return and the tool will give you the comparative pre and post tax earnings.

Its that simple!

For applicable tax rates refer to – Capital Gains tax for NRIs- It’s not that simple

Another Demonetization Coming?

The money changers in Arcade, Raffles place are again offering a rate better than the spot rate. The current spot is 47.20 and you could get 47.75 with the money changers.

Again the notes are all legit and there is nothing wrong that I could find.

Last time this happened, it was in October 2016 and the 1000 and 500 Rupee Notes were Demonetised in on 8th November 2017 (https://adityaladia.com/2016/10/11/cash-rate-of-inr-better-than-spot-in-arcade/)

I could not help but wonder if 2000 Rupee notes will soon be withdrawn and prove the rumours correct. If that happens where will Indian GDP go is anybody’s guess but till then if you are visiting to India then exchanging money in Singapore and carrying back is a profitable bet.

Indian Rupee – Real star or …

It’s a very interesting phenomenon every time SGD INR falls – people panic and there is a flurry of questions on SGD INR’s future. To me this anxiety is similar to a house owner checking on the market rate of the house they live, every week, and feeling sad if the latest transacted price in the neighborhood went down or celebrating if it goes up. In reality, this is just perceived loss/profit and is irrelevant unless the person is trading in properties and regularly buys and sells them for a living.

Anyway, leaving perceptions aside, lets look at how Indian Rupee has really performed against major currencies in the past 3 years before I turn my focus to SGD INR.

inr-summary

The Rupee has fallen against USD and JPY, against Chinese Yuan and Singapore Dollar its a flatline and the gains against EUR and GBP are not because Rupee has fundamental strength against them but because the 2 currencies have weakened due to their own issue – ECB monetary stimulus and Brexit vote respectively.

Also worth highlighting is Rupee’s inherent volatility where it went from 68/69 against the US dollar in Aug 2013 to 58 around Election time in 2014 and is back up at 67 mark – all in a matter of 3 years (refer comparative 1, 2 and 3 year charts at the end)

There is no doubt that the Rupee has been pretty stable in the past few months and the RBI has done a fantastic job of curbing the volatility in the face of BREXIT, expected US fed rate rise, Increasing Oil Prices,Redemption of FCNR deposits and escalating tensions with Pakistan.

But have the rupee or economic fundamentals changed to much in past few months? -I don’t think so.

India still imports 80% of its crude oil and as oil prices go up they would put a strain on the current account, the goods manufactured in China are still way competitive both in terms of cost and quality (maybe that’s why rupee is following the Yuan trajectory) and the NPA situation with Indian banks is still worrisome and could result in market turmoil.

Investing in NRE FD’s has generated stable returns depending on when one invested, refer – (https://adityaladia.com/2016/02/11/you-would-be-out-of-money-80-of-days-if-you-transferred-money-to-india-in-2015/) and would slowly stop being an attractive avenue as the interest rates in India go down.

Now coming to SGD INR, the current weakness is mostly due to flurry of bad news (or expectation management as I call it) on the economic and employment front. I have always maintained that the MAS is pro-active and lets the SGD adjust quicker to the market events as compared to what RBI allows or can allow with the INR.

All the expected or known negatives are already priced into Singapore Dollar and any other movement would be due to fed rate decisions. Even after the news of GDP missing estimates the SGD only fell around 1% which is very normal in the current volatile markets.

On the other hand there are a lots of factors for the Indian Rupee that needs to be priced in – merger of banks due to NPA’s, challenges for exports due to relatively strong rupee – China and other ASEAN countries, increase in crude oil prices, looming fed rate increase and of-course any escalation on the international borders with Pakistan.

As with the answer to keeping money in Singapore Dollar or remitting to India, the response is unique to every individual depending on their investment portfolio, diversification, cash flows and risk appetite.

48 would act as a very strong support and do factor in the cost of transferring money into India and remitting back, the cost of loan (if you are taking one) and tax obligations if you invest in property or stock markets when making any such decisions and don’t get stuck on specific numbers – transferring money at 49.80 is just as good as transferring at 50.

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INR performance – past 1 year

inr-1-year

INR performance – past 2 year

inr-2-year

INR performance – past 3 year

inr-3-year

IRFC Tax Free Bonds Open Today!!

IRFC (Indian Railway Finance Corporation) Tax Free Bonds have opened today and are probably the last TAX FREE bond issue for the year. There is no provision in the budget for 2016-17 for any tax free bonds and any new issue in the next year is extremely unlikely.

Additionally, this is the only issue in 2016 to date for which NRI’s are eligible.

Salient features:

Issue Date – 10th Mar to 14th Mar

Issue Size – Rs. 2450 Crore, of which 60% is reserved for retail investors ~ 1470 crore rupee

Eligibility – both NRI’s and residents

Coupon Rate – yearly interest rate of 7.29% for its 10-year option and 7.64% for the 15-year option to the retail investors investing less than or equal to Rs. 10 lakh

Rating – AAA from CRISIL, ICRA and CARE

There is a very high likely hood that the issue will get oversubscribed in the Retail segment on day one, anyone looking to invest should make an application today.

The current SGD to INR exchange rate is 48.20 offered by DBS Remit. I just made my application and would be looking for capital gains of appx. 15-20% on these bonds over the next 2 years.

 

SGD INR crosses 48!

image

The SGD strengthened to 1.4150 against USD overnight and that has pushed SGD INR to 48.02 mark. I am expecting INR to strengthen when the Indian markets open around 11:30 am Singapore time.

If you are looking to transfer money today then the next 2 hours is a good time using DBS Remit. The offered rate is 47.57 and is expected to fall down once the Indian markets open.

Disclaimer: These are my views and not investment/financial advice. I bear no responsibility for any decisions made by readers.

SGD INR stuck in a range?

Its been a few months since I wrote about the pair as most of the discussions were in comments to previous posts, but today’s MAS decision warranted a new post.

There were ripe speculations that MAS is going to ease the monetary policy (which it did) and Singapore is headed for a technical recession. The economy expanded by a modest 0.1% much against the consensus of a contraction of 0.1%. The immediate impact on the exchange rate was a modest gain from 1.4025 overnight to 1.3960 as I write.

One would question that why has SGD strengthened even though the policy has been slightly eased? There are various factors at play:

  1. The expectations of a USD rate increase this year are negligible. I would be surprised if the Fed raised the rates in Dec when the volumes are thin due to holiday season. My personal view is that it was a missed opportunity in Sep and Fed should have increased the rates but that’s a different topic of discussion.
  2. SGD had fallen all the way to 1.43 in anticipation of easing, but recovered slowly over the past week with rest of the regional currencies. If one looks at the bigger picture then Indonesian Rupiah has appreciated by around 9% against the USD and Malaysian Ringgit has firmed up by around 6% in past 10 days. The key words for me from the MAS policy statement is “slow the pace of local dollar’s gain”

MAS will continue with the policy of a modest and gradual appreciation of the Singapore Dollar Nominal Effective Exchange Rate (S$NEER) policy band. However, the rate of appreciation will be reduced slightly. There will be no change to the width of the policy band and the level at which it is centered, saying it would seek to slow the pace of the local dollar’s gains versus its trading partners.

Both Malaysia and Indonesia are key trading partners for Singapore and a greater than 5% jump in their currencies diluted any chance of SGD depreciation. The intent of MAS Is clear – it wants SGD to be slightly stronger than its trading partners.

Now if one looks at INR it appreciated very quickly in after the US job reports from the comfort that no fed hike is on the cards. It was good news for FII’s who can pump money in Indian Bonds and earn good interest rate. Many mistake this as FII investment in India because if one looks at the economic indicators they don’t look very good – be it industrial production. agriculture produce or job growth.

I have said this many times and would repeat again – the sooner INR falls towards 70 the better it is for India. The Indian exports are declining due to competition from other countries with weaker currencies and the day fed hikes the interest rate INR could dip 2-3% overnight and that is not a pleasant shock for the economy.

Anyway for now no major events are scheduled in the coming months other that the results of the BIHAR elections. I believe irrespective of the outcome the Rupee is scheduled to fall post-election results. If BJP wins there would be a knee jerk appreciation which will fizzle out as the economic data and realities will take center stage. If BJP looses then Rupee would immediately fall from a sentiment perspective.

So for the next few weeks I expect SGD INR to be range bound between 46-48.

Best options to Transfer Money from Singapore to India

With the jump in SGD INR the question of what is the best way to transfer money to India becomes important and has been asked a few times. My conclusion before today’s analysis was that DBS remit gives the best rates with the smoothest transaction experience. However in such a competitive market innovations and better pricing is expected and ICICI Bank with its new offering beats competition by a mile.

At the time of comparison the Spot SGD INR was 47.75 and below table shows how the 3 services which offer confirmed Rate transfer compared:

Service 3000 5000 10000 15000 20000
Money2India 47.18 47.35 47.48 47.52 47.54
DBS Remit 47.22 47.22 47.22 47.22 47.22
SBI Remit 47.3 47.3 47.3

As you can see for amounts 5000 SGD or more money2india had a substantially better rate than the competition and that happens because they have started charging 25SGD flat fee and reduced currency spreads. The rate money2india used was 47.66 and the results above are shows after taking the 25sgd fee and service charges into account.

Ofcourse the rates offered by money2india would change throughout the day but for transferring amounts greater than 5000 this would be my service of choice (the only other way to get a better rate is if you can find someone who wants SGD and would give you INR and deal at spot)

Couple of things to Note for Money2India transfer Service

1. Only allows upto 400,000 Rs equivalent to be transferred per day using the fixed rate service.

2. The rate is updated around 12:00 noon Singapore time

3.  Has a internal daily limit i.e. if the amount they have allocated for a day has been reached customers are refused transfers

I would have expected that there be no limit on amounts being transferred. With these limits it feels that money2india wants to only have small transactions so that they can earn more transfer fee. The rate still is better than DBS but as a customer I find these limits back door way of giving less to customers.

Update: Money2India no longer has fixed fee transfer service and the rates offered are not as good as SBI or DBS. For comparison of rates please refer to the widget on right or at the bottom (when using a phone)