Some interesting currency moves today

[JR8]

Somebody is gonna be filling their boots with this .....
Short term gain , long term pain!

Quite. Since the Eurocrats are such an unregulated/unmonitored bunch, you have to imagine that there were plenty 'front-running' that announcement (i.e. financially, for personal gain).

The EU is seeking short-term political salvation at the expense of tomorrow's generation. I suppose one ray of light is that they now seem to accept that they have one a hell of a problem. And as with many things in life, acceptance of that blunt fact has to come before there is any hope of remedy.

[Strong Eagle]

Question to you financial gurus out there. The SGD has been hanging around 1.25 to the US dollar but since October or so has been decreasing so that it is now 1.35 to the USD. What's happening here, and what does the future look like... this isn't helping my CPF savings.

[Barnsley]

Question to you financial gurus out there. The SGD has been hanging around 1.25 to the US dollar but since October or so has been decreasing so that it is now 1.35 to the USD. What's happening here, and what does the future look like... this isn't helping my CPF savings.

My company bill in USD , so good news for us

The Sing Dollar is strong against anything but the USD it would seem.

[Wd40]

Question to you financial gurus out there. The SGD has been hanging around 1.25 to the US dollar but since October or so has been decreasing so that it is now 1.35 to the USD. What's happening here, and what does the future look like... this isn't helping my CPF savings.

I am not guru, but just like to read about these stuff. SGD is pegged/managed against a basket of secret trade weighted currencies to makes its exports competitive. If SGD was allowed to free float its value would be a lot higher, like 30% higher atleast. It is being kept low artificially.

Now all its major competitors currencies are weakening mainly the AUD, MYR, EUR and JPY. The CNY,HKD and USD are the only strong currencies.

Singapore's own economy is struggling with growth rate slowing and inflation slowing so the natural MAS policy is to keep the SGD neutral or even weaker.

The outlook is difficult to predict but the expectation last year was that the SGD would reach 1.35 by the end of 2015, but it has already got there, may be because of the accelerated decline in the Euro.

I think the SGD will remain around these levels 1.32-1.37. But if some country out there does what SNB did, like if China or Hong Kong abandons the USD peg, there might be higher volatility.

[x9200]

How to tell whether some currencies get stronger/weaker if all is pretty relat(ed/ive)? Is there any relatively simple economy macro factor that can be here used?

[Wd40]

http://sbr.com.sg/economy/news/singapor ... nk-kim-eng

http://sbr.com.sg/economy/news/singapor ... -deflation

But core inflation will remain elevated on the persistent domestic inflationary pressures imposed by the tight labour market due to the tighter foreign workers quota & higher levies imposed. We do not expect the headline deflation to change MAS’ current policy stance “of a modest and gradual appreciation of the S$NEER policy band.” However, if we see an accelerated moderation in core inflation in next few months, then there may be a risk that the MAS may ease it policy stance in the upcoming April 2015 monetary policy statement

Just think about it. The MAS current policy is "modest and gradual appreciation". Inspite of this the currency has been falling against the USD. If MAS were to ease the policy, imagine where the SGD is going to be.

[Wd40]

How to tell whether some currencies get stronger/weaker if all is pretty relat(ed/ive)? Is there any relatively simple economy macro factor that can be here used?

Yes, its all relative. Its the relative movement that is the key here.

The simplest way of measuring in absolute terms is using the Big Mac index

http://www.theguardian.com/business/eco ... currencies

[JR8]

WD40 seems to have it well covered in his posts above ^

The future rate (or 'forward rate') is mainly derived from the respective national interest rates, and expectations of what those rates will be in the future. So in one way, if you can earn just say 2% on a a 12 month deposit in S$, but a superficially headline-grabbing say 12% on an IDR deposit, that's because the market thinks the IDR will have devalued versus the S$ by 10% in a years time.

-----
'The forward exchange rate (also referred to as forward rate or forward price) is the exchange rate at which a bank agrees to exchange one currency for another at a future date when it enters into a forward contract with an investor. Multinational corporations, banks, and other financial institutions enter into forward contracts to take advantage of the forward rate for hedging purposes.[1] The forward exchange rate is determined by a parity relationship among the spot exchange rate and differences in interest rates between two countries, which reflects an economic equilibrium in the foreign exchange market under which arbitrage opportunities are eliminated. When in equilibrium, and when interest rates vary across two countries, the parity condition implies that the forward rate includes a premium or discount reflecting the interest rate differential. Forward exchange rates have important theoretical implications for forecasting future spot exchange rates. Financial economists have put forth a hypothesis that the forward rate accurately predicts the future spot rate, for which empirical evidence is mixed.' [continues, at great length]
http://en.wikipedia.org/wiki/Forward_exchange_rate

But note a forward rate doesn't 'accurately predict' (IMO) what will happen in future, rather it is what today's collective expectations of tomorrow are.

In simple terms FX traders (in a bank, rather than the uncle kiosk next door to the kopitiam) are not trading currencies per se, it is perhaps more accurate to consider that they're trading future interest rate expectations.

cf.
'Global Economic Analysis - Forward Market Calculations'
http://www.investopedia.com/exam-guide/ ... market.asp

I also came upon this Forward Rate calculator. It's from HSBC, so one would hope it's based upon the actual market (expectations)...
Sell S$100k today for US$ for 'delivery' next week, you'd get US$74,350.
Sell S$100k today for US$ for 'delivery' in six months, you'd get US$74,240.
12 months = US$74,210
http://www.hsbcnet.com/gbm/fwcalc-disp#

The MNC trading/private client banks put out research on current expectations, and their basis. If you want to dig deeper into reasoned forecasts, tracking down something like that should provide it.

Good luck!

[Wd40]

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.

[JR8]

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.

....added to which there is political risk, and that the actual returns do not - I've heard - appear to correlate to the investment performance. So what happens between the returns earned, and those paid out/re-invested? I don't know if anyone knows, as CPF seems rather veiled in state secrecy, and it's natural to wonder why, considering other sovereign wealth funds disclose their performance. Well, that's just my passing impression...

Some time ago now a person who was considering 'quitting' SG asked me what I thought they should do with their accrued CPF. My gut response was 'get it out of CPF, out of SG, and reinvested in something transparent that you manage and control'. If the CPF vehicles at least published full audited accounts, it might go quite some way to changing that gut-fell, meanwhile...

[sundaymorningstaple]

If you are able to leave it there and retire in your own country, I reckon it's a good place "risk on risk" to park a large chunk of cash. It's going to be a while before other investment vehicles either beat the interest rate or match the risk factor. People here don't seem to realize that the CPF board IS transparent. It loans large chunks of funds to the investment arm of the government for a fixed return on their investment. However, the investment arm of the government is an entirely different entity and therefore, may not be quite as transparent as the CPF board. But as long as the CPF board get the return that was guaranteed them, why should they be responsible for reporting the returns of the investment arm of the government?

When you park a large sum of money in a CD in some bank, do you demand to know what they do with all the money? Or do you care about you interest coupons being timely and correct? As long as you are getting what you ask for, you have no gripe. CPF is a bit different, but having said that, the rate of return and the ability to actually use some of those funds to purchase housing, among other things, (including investing a portion of it on your own - nobody has every made a dime more than what they would have gotten from the CPF board on interest alone. In fact I think the vast majority lost money.

[JR8]

Perhaps someone could link what the annual returns have been over certain time-frames, 5-10-20 years? That would make further consideration simpler and more fruitful.

As one matures what your retirement funds should be invested in does shift towards to the lower risk end of the scale. The thinking being when younger you have time to ride out shorter term volatility for the promise of longer term higher returns: On the flip-side, closer to or at retirement, a common approach is moving to lower volatility/risk lower yielding assets. I.e. it's then less about the potential for further growth, and more about having locked-in wealth and income protection.

CD's (as I understand them) are at the lower end of the risk scale, but they're never going to set the world on fire. My own parents are in something perhaps like that, 'fixed rate (cash) bonds', of the sort that building societies issue in order to fund themselves and their mortgage lending. The returns are really quite a pittance, it is rather depressing to witness, but via a combination of their total lack of interest in anything financial, and our geographic separation, it's not going to change any time soon.

--- The other straight-forward avenue that might be considered that is often overlooked is having investments and at the same time having debts. What's the point having a credit card balance costing maybe 15%, and savings earning perhaps 5%? There is an argument in such circumstances that redeeming the debt 'pays you' (or returns you) a far higher sum. That's before consideration of debt payments often being from post-tax income, and investment return figures being pre-tax, which only turbo-charges the Kill-Debt-1st proposition.

[Barnsley]

The Lefties appear to have got the most seats in the Greek elections ..... I expect the Euro will come under some more pressure...

Wonder if the new guy will be able to re-negotiate some of the terms and conditions for the Greek debt.

Some other countries will be looking on very interested methinks!!

[JR8]

Messy eh? Not least that we're now likely to get protracted horse-trading during the formation of a coalition (Commies arguing over how to cut generous servings of pie for themselves).

Thoughts: Germany are going to make Greece suffer to the max, really; this is worse than 'a woman scorned', this is like a ditched gay bitch on heat that is now in full on destroy-mode.

And the worst case scenario for Berlin, that Greece exits and thrives. That will never be allowed to happen, in case it gives encouragement to the other rebel/ditherers like, Spain, Portugal, with Italy potentially also in the frame. Spain and Italy are surprisingly large economies, way more significant than the tiddler [tiny fish] Greece.

Once again I'm reminded of the execution of Admiral John Byng, for essentially mutinying in the face of an impossible task.

'The expression “Pour encourager les autres' is a well known quote from Voltaire’s Candide. The full quote is "dans ce pays-ci, il est bon de tuer de temps en temps un amiral pour encourager les autres" - in this country (England), it is good, to kill an admiral from time to time, to encourage the others'). It refers to the fate of Admiral John Byng who was executed in 1757.' [continues]
http://thepoormouth.blogspot.sg/2007/03 ... ardon.html

Or in more up to date terms, whacking a big monkey, stops all the smaller ones from chattering. Or, ensuring Greece destroys itself, will silence any other ditherers.

.... interesting times!

p.s. I haven't read it yet, but there's a piece of an article, towards the bottom here, an opinion from Daniel Hannan MEP. It'll be intersting to read, as I have huge respect for his insight, and braveness in saying what few others seem bright or bold enough to see.
http://www.dailymail.co.uk/news/article ... ction.html

--- Have a look at the current 1-month 'heat-map' on the euro vs other currencies. It shows a daily colour code vs each of the 20+ cross-currency values, in a simple to interpret way. Smokin' hot!
http://www.digitallook.com/heatmap_fx/#howToUse

Euro down over one month, versus say the Swiss Franc > -18%! Several others are over or nudging 10%.

It's 'only' down 4.75% versus GBP, but I expect because of the collateral damage the Pound has taken itself.

Hollande of France (Germany's sometime poodle) called Tsipras to congratulate him. It seems Merkel hasn't.... probably too busy refuelling the Panzers, and setting their GPS's for Athens...

[JR8]

Ooh-er! If you thought Greece's problems weren't bad enough: The leading Tsiriza party has just entered into a coalition with the Greek ANEL party, to form a coalition government.