Should our dollar sing?
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Should our dollar sing?
The Singapore is at its strongest against the US dollar since March. Only about $1.75 is needed to buy a US dollar now, against a low of 1.82 a few weeks ago. Some feel it might be better to let the Sing dollar weaken against the US dollar because of the recession. EUGENE WEE explains how this affects the economy.
STRONG S$
WHAT IT MEANS: A strong dollar can be exchanged for more of a foreign currency. For example, a strong Sing dollar may buy five units of a foreign currency, but a weaker dollar might buy only four units of the same currency.
GOOD
FOREIGN GOODS ARE CHEAPER: Since foreign goods are priced in foreign currency, a strong dollar can buy more. It makes imports cheaper.
IT IS CHEAPER TO MAKE FOREIGN INVESTMENTS: For example, Japanese stocks, shares and property become more affordable.
KEEPS INFLATION LOW: Inflation is the gradual increase in the price of consumer goods. If the dollar is strong, cheaper imports tend to keep prices down.
BAD
FOREIGNERS WILL INVEST LESS: Singapore assets like stocks and property will cost more, and will be less attractive. This will lead to our economy slowing down.
FOREIGN COUNTRIES WILL TEND TO BUY LESS: Our country’s goods will become relatively more expensive. This too could result in an economic slowdown.
WEAK S$
WHAT IT MEANS: A weak dollar can be exchanged for less of a foreign currency. For example, a weak Sing dollar may buy five units of a foreign currency, but a strong dollar might buy six units.
GOOD
MORE EXPORTS: Other countries will tend to buy more of Singapore’s goods because they become relatively cheaper. This could result in economic growth as we make more money from the increased exports.
FOREIGN INVESTORS WILL BE ATTRACTED: They will want to put their money in Singapore assets because it becomes cheaper for them to do so. This helps to boost the economy.
BAD
FOREIGN GOODS BECOME MORE EXPENSIVE: The price of imports such as Korean cars, Thai rice and Japanese CD players will go up. This could lead to higher inflation. It becomes more expensive to invest in foreign assets.
MAS: No reason to weaken Sing $
The Monetary Authority of Singapore (MAS) explained in a policy statement that the current slowdown reflects a decline in demand, and not an erosion of Singapore’s competitiveness. Thus, there is no need for a weaker Sing dollar. However, European investment bank ING-Barings thinks a weak dollar will help our economy bounce back. In a briefing recently, it pointed out that when MAS adopted a weaker dollar policy during the 1985 recession, the economy responded well.
Singapore, The New Paper, Tuesday, August 28, 2001
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Recession usually mean strenghtening, inflation usually weakening.
There there is quantitative easing.
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Originally posted by βÎτά:
Recession usually mean strenghtening, inflation usually weakening.
There there is quantitative easing.
what do u know about anything??!!!!!u are a vegetable farmer for gods sake!:)
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Sing$ set to weaken against greenback over euro fears: Analysts
It is likely to depreciate further if coming Greek polls deal another blow to Europe
By MELISSA TAN
CONCERNS over the euro zone debt crisis and the upcoming Greek elections will weaken the Singapore dollar significantly against the greenback, according to economists.
The dollar traded at around $1.2745 to the United States dollar late yesterday, and is tipped to depreciate to $1.35 in the near future and be at around $1.30 by the end of the year.
"The Singdollar is again feeling the heat from the turmoil engulfing the euro zone," said UOB Economic-Treasury Research in a note on Wednesday, pointing to renewed risk aversion and nervy investors seeking safety in the US dollar.
After hitting $1.2362 against the US dollar on May 2, the Singdollar depreciated 5 per cent to $1.2972 against the US dollar last Friday, UOB noted.
It is likely to weaken further if the Greek elections on June 17 deal another blow to the beleaguered euro zone.
UOB expects the Singdollar to "weaken further to $1.35 (against the US dollar) in the immediate aftermath of a Greek tragedy" but strengthen to $1.30 in the fourth quarter of the year.
Most analysts echoed this prediction, adding that they expected the euro to decline further and volatility to continue.
The Singdollar strengthened to $1.59 against the euro last week, the strongest it has been in 10 years. Maybank 's head of forex research Saktiandi Supaat told The Straits Times: My view is that there will be further declines in the euro."
He said he had previously expected the Singdollar to end the year at $1.29 against the green-back, but was now revising that "possibly towards $1.32 to $1.33".
"I think over the next few weeks, things will get a bit more volatile...We think this volatility will last at least till end-June."
Manufacturers cheered the weakening of the Singdollar, as a weaker currency makes the country's exports cheaper.
Dr Moh Chong Tau, deputy president of the Singapore Manufacturers' Association, said: "If (the exchange rate) is stable at around $1.30 that'll be an ideal situation...As long as the currency settles within that region it'll be fine."
But despite the exchange rate volatility, currency hedging requires funds, and not many small and medium-sized manufacturers have enough cash flow or familiarity with such tools, Dr Moh noted.
The Monetary Authority of Singapore said in a note yesterday that Singapore's growth prospects were "likely to remain modest against a muted external environment".
"Unlike previous recoveries, where manufacturing played an important role... Singapore's gross domestic product growth this year will be driven by domestic and regional-oriented industries instead," it added.
While the weakening of the Singdollar might lead to worries over imported items becoming more expensive, Bank of America Merrill Lynch economist Chua Hak Bin said he expected that it would only have a fair limited effect on imported inflation.
He noted that the Singdollar "has weakened a lot more against the US dollar than it has against the trade-weighted basket (of currencies)."
"It (the Singdollar) has strengthened against the euro and other Asian currencies, which have weakened a lot more."
About 60 per cent of Singapore's inflation is imported, according to Dr Chua.
He expects the Singdollar to strength, to end the year closer to $1.21 to $1.22 against the green-back if the US Federal Reserve conducts a third round of quantitative easing later this year.
Money, The Straits Times, Friday, June 8 2012, Pg B23