Some interesting currency moves today

[maneo]

Slightly old, but nice article on CPF:
https://sg.finance.yahoo.com/news/truth ... 00234.html

2. The CPF Interest Rate is Too Low
Compared to other financial products in the market?
Let me put it this way: if my office ceiling were the returns of a moderately well performing hedge fund, the CPF wouldn’t even be the floor. The CPF would be a piece of hair caught under a PVC mat, in the office three floors below me.
Even endowment policies touted by insurers project returns of 3.75% as a low estimate. And there are blue chip stocks that provide annualised returns of 5% to 9%.
Given a typical inflation rate of 3% (I am being generous), the CPF grows money at the amazing rate of NEGATIVE 0.5%. It’s guaranteed alright; guaranteed to provide crap returns

.

If you are sure that you will not come back to Singapore to retire, then there is no reason to keep the money in CPF especially if it is a really big chunk of your overall portfolio. The returns are low and there is FX risk. May be there are some structured products out there to hedge the FX risk.

Just checked my annual CPF statement (for taxes due to another country).
Seems it returned 4.3% this year.
Not bad for low risk.

[JR8]

Just checked my annual CPF statement (for taxes due to another country).
Seems it returned 4.3% this year.
Not bad for low risk.

Just remember that the euro was conceived and perceived as even lower risk, far lower, until only very recently.

[Wd40]

Yeah, given the low returns, although fixed, isn't worth taking in the face of the FX risk. If you are not planning to return to Singapore to retire, then why keep it in Singapore of all places? Is Singapore the safest haven of all?

[JR8]

When even the man on your the street is considering buying a flat in London or on the Gold Coast etc., why might you think the 'white horses' have not long being doing the same, just on a much grander scale?

[Strong Eagle]

Paul Krugman on Greece. http://www.nytimes.com/2015/01/26/opini ... tmare.html

Where are the next dominoes to fall? Spain? Portugal?

I wouldn't be at all surprised to see negotiations that go nowhere at a high rate of speed, thereby causing Greece to extricate itself from the Euro. It will initially price the Drachma at one to one with the Euro and insist on paying down debt with Drachmas. Within weeks Greece will begin to devalue the Drachma, thereby reducing its debt obligations, making its labor more competitive, and boosting its tourism, a chief source of foreign exchange.

[Wd40]

Paul Krugman on Greece. http://www.nytimes.com/2015/01/26/opini ... tmare.html

Where are the next dominoes to fall? Spain? Portugal?

I wouldn't be at all surprised to see negotiations that go nowhere at a high rate of speed, thereby causing Greece to extricate itself from the Euro. It will initially price the Drachma at one to one with the Euro and insist on paying down debt with Drachmas. Within weeks Greece will begin to devalue the Drachma, thereby reducing its debt obligations, making its labor more competitive, and boosting its tourism, a chief source of foreign exchange.

I wonder what you would do if you are a wealthy Greek, in this situation. Move all your money to USD accounts?





May be one of the reasons why dollar is rising so fast is because of so much demand, Russians, Japanese and Europeans, everyone wants to be in USD. Until recently Swiss franc was a safe haven, but not anymore. Looks like the dollar strength is here to stay.

[Wd40]

Slightly off topic but recently I have noticed locals in the train using FX trading platforms in their phones also some of them carrying FX/trading related training material.

[Strong Eagle]

Slightly off topic but recently I have noticed locals in the train using FX trading platforms in their phones also some of them carrying FX/trading related training material.

And... what's the difference between this and pulling slot machine handles at MBS? Probably have a better chance at winning at MBS.

[Strong Eagle]

May be one of the reasons why dollar is rising so fast is because of so much demand, Russians, Japanese and Europeans, everyone wants to be in USD. Until recently Swiss franc was a safe haven, but not anymore. Looks like the dollar strength is here to stay.

Strange, isn't it. 18 trillion in debt, paying virtually nothing for its Treasury notes, and it is still the currency of choice.

Not many alternatives out there... this thread alone has hashed out all the shortcomings of the Euro and why it will never be a reserve currency.

The Chinese could have made serious inroads into the US domination of reserve currencies but with their refusal to play fairly and realistically in the international game by keeping the Yuan artificially low, no one trusts the Chinese with their money. Free flows across borders and a properly floating currency are necessary for China but a dictatorship will never allow that.

[JR8]

@SE
Thanks for that link. A useful encapsulation of how this situation has come about.

The euro, an ideological project, has no reverse gear. It's like 'Hotel Currencyfornia' [ ], you can enter, and 'you can check-out any time you want, but you can never leave'. Greece will be kept in the euro at all costs (born by itself, of course), or it will be destroyed by the North European core states. The blunt message for others to note, will be that there is no alternative to be found by leaving the euro.

So where next? The rest of the 'PIIGS'. I hear little discontent from Ireland, so that leaves Portugal, Italy and Spain. The latter two are major economies. Spain is the 4th largest economy within the EU. Spain has elections this year.

-----
“The Spanish version of Syriza – Podemos - is currently polling in second place ahead of the elections due by December this year. If an anti-austerity party was to take power in the Eurozone’s fourth largest economy, then the risk of a full-blown political crisis could seriously impact European markets.”
http://www.digitallook.com/news/market- ... 45145.html
-----

So my non-euro wager, is going to be staked on the heat turning up on Spain next. If Spain starts threatening to 'do a Greece', or perhaps has something like a 'Summer of discontent' (strikes/rallies/demos. etc) it's going to be a volatile year for the EU. Since most of the employed population is on holiday for 2.5-3 months over the summer, there will be a huge amount of people sitting around considering affairs and what might be done. How the northern core seek to pre-empt that (if at all!) could be interesting. Events in Greece have shown that the EU is completely reactive rather than proactive, and even then very reluctantly, and ineffectually. So.... time to stock up on popcorn and beer, and sit back and watch the show unfold. It's like a feel-good war film, with the merciless and bullying Germans and their collaborating French poodles getting a seriously hard kicking*.

--- It comes to mind that the euro-zone is not only a political union, a trading union, a currency union, it was designed as a debt union as well. Of course, otherwise the inherent internal economic tensions would make it non-viable I.e. the wealthier states should expect to help support the poorer ones, that is what they signed up to. But debt-pooling has never happened, each state still issues it's own national euro-denominated debt. And in place of this debt-pooling, there seem to be ill-thought out 'rescues' that only serve to nudge the recipients towards final implosion. The blame rests squarely on the deluded architects of this scheme.


*[For the avoidance of any doubt, the German and French politicians, NOT the citizenry].

[Addadude]

@SE
So where next? The rest of the 'PIIGS'. I hear little discontent from Ireland, so that leaves Portugal, Italy and Spain. The latter two are major economies. Spain is the 4th largest economy within the EU. Spain has elections this year.

Oh believe me. There is a lot of discontent. In fact the recent anti-water charges marches (which though they were not really so much about water charges as they were objections about being told what to do by faceless, unelected European bureaucrats, did force the government to backtrack quite significantly and revealed how little thought was actually put into the water charge process) scared the living bejeezus out of the Irish government. And with a GE in the offing, who knows what will happen? Gerry Adams might suddenly find himself Taoiseach (prime minister).

[Primrose Hill]

USD is still the currency of last resort.
Hotel Currencyfornia? And I thought being a member of the LME is similar- you can join but can't leave.
My guess is that new PM will get his way - the loan will be so far extended into the sunset we may as well call it a silent default. They will stay in the euro, no way can they reinstate the dharma. If they do that the people that have remain in Greece will see 50% of their savings (if there's any left) wiped off overnight, that's not going to make Mr Troika is well liked newly minted PM.
However, I can't see latest QE by ECB will have an effect though.

My question is why is the USD rising against SGD whilst other currencies are tanking against SGD? Its MYR2.7 to SGD and SGD is doing well against the GBP and EURO

[Wd40]

SGD is a pegged currency against a basket of trade weighted currencies. The USD strength pulls it up a bit and the weakness of others pulls it down a lot. Current MAS stance is gradual appreciation against this whole basket. But if their stance changes in the next policy meeting in Apr, which is quite possible, then you can expect it to underperform other currencies as well.

In the years after the GFC, SGD appreciated a lot against most currencies, because MAS was letting it strengthen to counter inflation.

[JR8]

@Addadude
That's interesting, it reminds me of how little news I get to hear of 'Ireland' (as a whole) at all!

I hope your last line is in jest. I mean how could he sit (or not, as is his habit) in the British parliament and get elected in the Republic of Ireland?

[Addadude]

I hope your last line is in jest. I mean how could he sit (or not, as is his habit) in the British parliament and get elected in the Republic of Ireland?

Alas no. He is indeed in the Irish parliament now... From Wikipedia:

"Gerard "Gerry" Adams (Irish: Gearóid Mac Ádhaimh; born 6 October 1948) is an Irish republican politician, president of the Sinn Féin political party, and a Teachta Dála (TD) for Louth since the 2011 general election"

The Irish people really have very little choice in GEs. Fine Gael (FG) (in power now, supported by the Irish Labour party)is basically a conservative party. But so is the other traditionally big contender, Fianna Fáil (FF). And the so-called Labour party is so central it is practically to the right. The electorate are so disillusioned with these parties that they are now turning in increasing numbers to more "outlier" parties like the Green Party and Sinn Féin (SF). All opinion polls show that in the event of a new GE, Labour will almost be completely eliminated from parliament with their seats taken by Sinn Féin. Which means either FG or FF will have to make some kind of Faustian pact with SF to govern the country.

Better get used to the idea of the bearded one being at the very least Tánaiste (Deputy PM) of Ireland.