Hi Kubes & Vulcan --- To buy or not to buy

[SGD]

Is it a gud time to buy USD over next few days before the vote on debt ceiling?

[Vulcanl]

SGD,

The SGD may actually decline vs the USD tomorrow (assuming we wake up and find no debt deal in place), as the herd panics and bails out of all manner of asset classes. 

I would wait until Tuesday at the earliest before buying SGD...however long term (3 months or more) it is still a better currency to hold.

[clueless V]

Dead wrong - the SGD strengthened against the USD.

[Vulcanl]

Really?  How so? 

[SGDman]

One for One by end 2012.

Nailed on.

[Kubes.SG]

SGD, if you into playing forex, then the USD is about the worst bet you could make.  Current uncertainties will create short term volatility but when you look at the fundamentals the trend for the USD against most currencies is down.  Assuming that China does not implode, (which will screw SG more than most places), the best long-term bet is the AUD.  Today it hit its highest level since floating 28 years ago, and some analysts are predicting the AUD will hit USD1.50.

$US1.50 a prospect as AUD dazzles
July 27, 2011 - 12:51PM

Business Day reporter Chris Zappone looks at the forces sending the Australian dollar to record highs.

So, the higher-than-feared inflation figures have whipped the Australian dollar to a fresh post-float record against the greenback.

The next barrier is $US1.11, and, longer term, the Australian dollar has $US1.50 written all over it, so long as the China boom continues.

For the currency herd, in fact, the Aussie dollar has undergone a significant change. Our currency is no longer just a “risk trade”, which is a currency that waxes in the good times then wanes when things get rocky on the global economic front.

Risk has risen lately amid the spectre of a US debt default, but the local dollar has risen too.

True, the greenback is getting a thrashing as investors lose confidence in America. And there's nowhere to turn. There would have been a flight of capital into the euro, yet Europe is in disarray as Greece heads for inevitable default and other euro members teeter. The yen has risen but Japan's post-growth economy makes it a less-than-appetising destination for capital.

There is the Swiss franc, which has shot the lights out. But this small European tax refuge has a case of capital-overload. As a result, the Aussie, rather than being sold off in recent weeks, has pushed to new highs.

Reserve Bank governor Glenn Stevens noted recently that other central banks have been buying our buck. It's a proxy for commodities, Australia's debt-to-GDP ratio is low and our interest rates are relatively high. And privately Stevens – despite the pain for exporters – wants the dollar high. It keeps a lid on growth, and inflation, and saves him having to hoist interest rates.

Now, more than ever a proxy for China, the dollar has broken links with its dollar-bloc mentor the greenback. But it is also proving resilient like never before – and this is the essential change – even as instability has taken grip on the world economic stage.

Rate gap

As long as China holds, the fundamentals are solid. As much as anything, the strong currency is down to high interest rates. Whereas rates in the US, Japan and Europe remain depressed, the base rate here at 4.75 per cent is the highest in the developed world. The interest rate differential attracts foreign investors. They chase the high rates, the rising dollar.
 
And as long as commodities keep rising, inflationary pressures will continue and rates here will stay higher than the rest of the world.

Then there's the most recent trade numbers, for the June quarter. The “terms of trade” rose 5.3 per cent to the highest level since records began in the 1870s. We cannot underestimate the potency of this metric. The terms of trade is the measure of export to import prices, how well Australia does versus the rest of the world, on the basis of relative prices.

It was the agricultural trade, wool and wheat, which delivered this nation's wealth last century, brought us our standard of living. Now, it's coal and iron ore, gold and base metals.

The Reserve Bank estimates that for every year the terms of trade stays at these levels it is worth about 12 to 15 per cent of Australia's $1.3 trillion annual economic output – as much as $200 billion.

And so it is that, as long as China keeps on and commodities prices keep pushing higher, the local dollar will keep rising.

With the US economy – and its currency – in terminal decline, the trend is the Aussie's friend.

[Vulcanl]

Kubes,

It's great to see you posting again.  I missed You 

Also good to see your finally coming around to my 'Asian Decoupling' scenario from 3 years ago 

[clueless V]

Really?  How so? 

The SGD may actually decline vs the USD tomorrow

21 July 1USD =1.2105 SGD
22 July 1USD =1.2083 SGD
25 July 1USD =1.2083 SGD
26 July 1USD =1.2033 SGD
27 July 1USD =1.2006 SGD

The SGD is strengthening against the USD.

Do you understand what you are saying?

[Vulcanl]

clueless V,

"...The SGD is strengthening against the USD..."

Yes, indeed as I have repeatedly stated it would (for years now on this board)

"...Do you understand what you are saying?..."

Yes.  I think it is you that is having a problem with reading comprehension.  This is what I posted on Sunday:

[The SGD may actually decline vs the USD tomorrow (assuming we wake up and find no debt deal in place), as the herd panics and bails out of all manner of asset classes] 

[I would wait until Tuesday at the earliest before buying SGD...however long term (3 months or more) it is still a better currency to hold]

I don't see how it could be reasonably shown that I was 'dead wrong' about this...a purchaser who bought SGD on Tuesday has been better off to now.

The situation re: the USD is extremely volatile with very little short-term visibility.  It pays to be cautious.  I did not expect a huge crash in the USD on Monday, and I was correct about this. 

[this can not be true]

My God is this guy for real?

He said the $Sin may strengthen agains the $U.S Tuesday. Someone posts evidence that shows the opposite happened and he is still trying to claim he was right.

Truly unbelievable!

[Vulcanl]

PP,

26 July was Tuesday....one USD bought you less SGD on Tuesday (1.2033) than it did on Monday 25 July (1.2083).

This indeed means that SGD has strengthened against USD.

[clueless V]

clueless V,

"...The SGD is strengthening against the USD..."

Yes, indeed as I have repeatedly stated it would (for years now on this board)

"...Do you understand what you are saying?..."

Yes.  I think it is you that is having a problem with reading comprehension.  This is what I posted on Sunday:

[The SGD may actually decline vs the USD tomorrow (assuming we wake up and find no debt deal in place), as the herd panics and bails out of all manner of asset classes] 

[I would wait until Tuesday at the earliest before buying SGD...however long term (3 months or more) it is still a better currency to hold]

I don't see how it could be reasonably shown that I was 'dead wrong' about this...a purchaser who bought SGD on Tuesday has been better off to now.

The situation re: the USD is extremely volatile with very little short-term visibility.  It pays to be cautious.  I did not expect a huge crash in the USD on Monday, and I was correct about this. 

What's the use of a ball-less prediction? So, the stock market may actually decline tomorrow. Gold price may actually go up tomorrow.

May be you are lucid and sane

[clueless V]

PP,

26 July was Tuesday....one USD bought you less SGD on Tuesday (1.2033) than it did on Monday 25 July (1.2083).

This indeed means that SGD has strengthened against USD.

Typical spineless one. PP obviously made an error - he should have said S$ declined instead of strengthened. He was obviously referring to those posted rates. And yet you have to latch on to this obvious and honest mistake to wriggle your way out.

Maybe you have balls?

[Vulcanl]

clueless,

What you amusingly refer to as 'Ball-Less' I refer to as adequately conservative for this very interesting short-term time span where we are witnessing unprecedented events unfold.

I have been opining on Asia's decoupling, Gold prices, the USD-SGD rate, HDB prices, Singapore's prospects, and other topics for years now on this board.  I will let those opinions speak for themselves as to the courage of my words.

Please take a more respectful tone with me going forward if you would like to exchange any ideas going forward.

[Vulcanl]

clueless,

"...Typical spineless one. PP obviously made an error - he should have said S$ declined instead of strengthened..."

If that poster had stated that, he/she would then have been distorting my statement...WHY exactly do you think that the poster should have stated that?

"...He was obviously referring to those posted rates. And yet you have to latch on to this obvious and honest mistake to wriggle your way out..."

I am certain that this was indeed an obvious and honest mistake, which is precisely why I responded politely (unlike what you have done).  Try to calm down, clueless.  We are just having a discussion and nothing more. 

"...Maybe you have balls?..."

Yes, maybe I do.  But I guarantee you will never find out for sure!!