$300K Sg dollars. Convert to AUD$ or US$ or UK Pounds or keep it in Sg$

[time to sell SGD]

Sell Singapore Dollar Against Basket of Currencies, RBS Says

Bloomberg, 7 Jan 2009

By Patricia Lui

Jan. 7 (Bloomberg) -- Investors should sell the Singapore dollar and buy a basket of currencies to profit from the local central bank adopting a weaker currency policy this year, said Royal Bank of Scotland Group Plc.

The U.K.’s second-largest bank recommended selling the Singapore currency and buying the U.S. dollar, euro, New Zealand dollar and yen in a ratio of 56:28:11:5. Investors could also sell the city’s currency and buy the U.S. dollar, euro, New Zealand dollar, yen and rupiah in a ratio of 44:25:11:12:8, RBS said.

“Singapore’s recession has intensified and the risk is that growth conditions will deteriorate further as the external shock starts to feed into the labor market,” Chia Woon Khien, a Singapore-based interest-rate strategist at RBS, wrote in the note which she confirmed today in a telephone interview.

Singapore’s dollar traded at S$1.4722 against the U.S. dollar as of 12:50 p.m. local time, according to data compiled by Bloomberg. The currency has lost 2 percent since the start of the year, the second worst performer after South Korea’s won.

The local dollar fell 0.5 percent in 2008, the smallest loss among eight of the 10 most-active currencies in Asia that declined last year. That compares with a 26 percent slide in the Korean won and a 19.2 percent slump in the Indian rupee.

Singapore’s central bank manages its monetary policy by guiding the currency within an undisclosed band based on a weighted basket of major trading partners’ currencies. Policy adjustments are made by changing the slope, width and centre of the band.

Negative Gradient

The authorities stopped seeking currency gains at the October policy review after the country fell into a recession in the third quarter, replacing it with a zero appreciation stance. A weaker currency would support exports, although it may also fuel inflation by making imports more expensive.

The Monetary Authority of Singapore will likely “slant the gradient of appreciation to negative from the current zero percent,” the note read. “They may look for 1 to 2 percent depreciation per annum,” Chia said in the interview.

The $161 billion economy may contract as much as 2 percent this year, twice as much as a Nov. 21 prediction, the government said last week. Gross domestic product shrank an annualized 12.5 percent in the fourth quarter from the previous three months. Exports fell the most in more than six years in November.

The government is speeding up its response to the global slowdown and will bring forward its 2009 budget announcement to this month to help limit job losses, Prime Minister Lee Hsien Loong said on Dec. 31.

[SGD Bear]

The shock of the Dollar weakness is now over, so the rest of the Asia currencies will continue their downward decline

[Dr. Phil]

I would not count SGD out unless government allows it to lose value with the mistaken belief that cheap exports are the panacae. This clearly has not helped USA over the pasy 8 years.

As for GBP, the recent BofE panic cut in interest rates will cause the GBP to fall below the Euro. Sterling will not even achieve parity with the Euro and Brown will now move to scrap the GBP since it is essentially "English" currency and our fate will be with the dodgy Euro and an increasingly divided Europe, with faceless beaurocrats deciding on our levels of domestic taxation for the first time.

The UK government continues to print money...like USA it believes it can spend its way out of a recession. Perhaps USA can because property is at historically low prices, but not UK.

Remember 10 years ago when mortgage loans were about 3x annual salary and the majority of people could live confortably? Imagine trebling property prices at that time without any significant increase in salary levels. Well that's where we are today and attempts by Brown to tempt citizens to borrow more will not rectify the situation. Its a clearly not even a short term fix. It simply is a ploy to buy votes for a Spring election but things are falling apart faster than flash Gordon imagined.

In UK it remains a question of who will be responsible for the negative equity? We need banks to sort the negative equity out. Then we can all move on.
Isn't that why they were paid billions?
 

[Vulcanl]

Dr. Phil,

Stop this please.  It makes me uncomfortable to have to agree with you.

[AllinMustWin]

So where did you end up deciding to invest your $300K Sg dollars?

I'm curently in the same situation and still not sure where to place my bets. Looks like I have missed the SGD -> AUD sub $1 bandwagon... at least in the short-term.

I read with interest the bank analyst recommnedations in earlier posts... buy USD, Euro, etc. Isn't the majority view that these currencies will fall during '09 (or is the logic to buy them as they will fall less than the SGD)?

What about pound sterling? Why don't the bank analysts recommend converting SGD -> GBP, given that the exchange rate seems exceedingly attractive at the moment... or it is because they see the pound sinking even lower this coming year?

I also noted with interest that NZD was recommended in the basket of currencies to buy with SGD this year? Can anyone provide background logic to this recommendation... as I've read that the Reserve Bank of New Zealand is likely to slash interest rates yet again at the end of Jan '09?

[What to do]

I am getting a bit confused with all the helpful advices above and cant come to a conclusion.

I am more inclined towards Australian dollar as I believe it will rise against Sg dollar in the months to come, given it has high interest rate returns and economy seems to be more stable than Sg.

How about currencies in super rich countries like Dubai or Brunie?

Do you they are a safe bet?

[great idea]

Buy Brunei dollars 

[Blaze]

I am getting a bit confused with all the helpful advices above and cant come to a conclusion.

I am more inclined towards Australian dollar as I believe it will rise against Sg dollar in the months to come, given it has high interest rate returns and economy seems to be more stable than Sg.

How about currencies in super rich countries like Dubai or Brunie?

Do you they are a safe bet?

LOLs... Yeah, Brunei Dollar. You know that is pegged by SGD, how do you make your profit Einstein?   

[Dr. Phil]

Are you watching Sterling crash?

This month the Singapore Budget may devalue the SGD so I am out of SGD short term. I will return after the devaluation.

Personally, I think USD still looks good short term??

There do not appear to be any other options, AUD is far too volatile and I am not resident Down Under. 

[Vulcanl]

Dr.Phil,

Devaluation of the SGD makes no sense in this environment.  It did in 1997 when Western demand for Asian exports was strong.  The problem right now is that demand from the West has collapsed.  So devaluing the currency will not make much of a difference in terms of spurring exports.

What the SG gov’t needs to do is implement temporary relief measures in the budget (tax rebates, government hiring, worker retraining, HDB assistance)  to ride out this storm until whatever replaces the old model emerges. 

I am very nervous about USD and now have very little sitting in USD cash.  Since I intend to remain in Singapore for at least the next 2 years I am comfortable in sitting on SGD cash instead.

[Dr. Phil]

Dr.Phil,

Devaluation of the SGD makes no sense in this environment.  It did in 1997 when Western demand for Asian exports was strong.  The problem right now is that demand from the West has collapsed.  So devaluing the currency will not make much of a difference in terms of spurring exports.

What the SG gov’t needs to do is implement temporary relief measures in the budget (tax rebates, government hiring, worker retraining, HDB assistance)  to ride out this storm until whatever replaces the old model emerges. 

I am very nervous about USD and now have very little sitting in USD cash.  Since I intend to remain in Singapore for at least the next 2 years I am comfortable in sitting on SGD cash instead.

Yes I agree. That is indeed a smart budget.

All countries will see exports fall as international trade falls and attempts to stimulate export demand by devaluing can backfire. I believe business want confidence first and foremost and this means a stable country and currency, a peaceful environment, a smart population fluent in Engliah (and Mandarin) etc. Singapore had all of that and more but recent inflation in the property sector shook confidence and has tarnished Singapore. The many suffer for the few.

Now proposals for a deliberate devaluation is effectively tantamount to taking part of our savings which further reduces confidence in Singapore.

Singapore's premier reputation has been hard won over many years and can so easily be lost and is far more difficult to recover if indeed it can be fully recovered, I suspect not. But I have confidence in Singapore and SGD long term.

Today there is no value in savings deposited for interest alone. Cash can appreciate if invested in a strong currency and Singapore can attract savings from around the globe, much the same way as Switzerland has done for decades. Today investors do not want 0.1% interest or even 2.5% interest on savings when, if SGD holds its value, there has already been a 33% gain against GBP this last year alone and this gain may double very quickly since UK is in big trouble and GBP has fallen over the last 24 hrs.

I agree about USD but continue to hold savings in USD for the short term. Obama's inauguration may add value. The SGD devaluatio this month, if it happens, will also creat immediate value. 

I have always believed USD would be the last currency standing but the Americans are squandering other people's money (creating debt for their children) at a great rate of knots in what appears one final spending orgy. Banks have their vaults open busily soliciting taxpayers money to cover their trading losses when governments only need to underwrite approved credit to businesses to facilitate trade. They can effectively ignore banks, or should be able to do, if the banking sector is indeed part of the free market and not one huge oligopoly.

I would also consider the AUD but for me it is a volatile currency as indicated by the high interest rates. For many, the interest earned may not compensate for the loss of value if it should fall in value and 2009 will be hard for all. Foreigners can not buy landed property Down Under so there is no incentive for me as there is for residents who will be relatively unaffected by devaluations of AUD. That is not a criticism, perhaps it is prudent to restrict property to residents, it certainly avoids the kind of speculation and inflation we have experienced in Singapore and also UK from oversea cash.

We have seen how overseas investment in property can indeed destabilise a country by creating inflationary pressures.