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Currency movements. Effects from COVID-19.

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In my trip to Melbourne and Sydney just 18 months back, the currency exchange was not on my side. It was very close to RM3 to AUD1. Everything I wanted to buy, I needed to think thrice (3 times). Well, nearly everything except on our 5th day in Melbourne and everyone could no longer stand not having any Malaysian food. We dropped by a restaurant owned by a Malaysian and went crazy with our orders without any consideration of the fact that the Chicken Rice was AUD15 and it was actually RM45. Who cares. Missing Malaysian food is NOT an option yeah. Fast-forward to this week. Take a look at the AUD vs RM exchange rate as below:

As for the reason why the AUD is dropping versus the USD (nope, not versus RM). Read here: Article in The Sydney Morning Herald

Source: xe.com
Source: xe.com

Right after the chart for RM vs AUD, we have the chart showing RM vs the Pound. (GBP). By far more fluctuations over the years yeah. Within the past 2 years, the best exchange rate for us (Ringgit) is around now. The worst was when it was GBP1 to RM5.6 Want to know what was the exchange rate in 1997? Say, month of November? It was close to GBP1 to RM8. I knew because at that time, I was in the UK for my degree. So, in this sense, the ringgit was far weaker way back in 1997 / 1998 versus today. Our currency is now stronger.

Before we start to be happy with these two exchange rates versus two advanced nations, let’s look at the USD and the Ringgit. Within the past two years, the time when ringgit was the strongest versus the USD was on 11th April 2018. Today, we are at RM4.41 to USD1. Perhaps we could also say that we are fortunate as this is below the rate during the 1997 / 98 ASEAN financial crisis? Well, one major reason for the USD strengthening against everyone else was simple. USD has always been seen as the safest currency in times of crisis. Thus, investors will all be selling all their other currencies and turn them into USD instead…

Source: xe.com

When we look at these currency fluctuations, we will learn that when we invest, it’s best to look at the underlying value of what we intend to invest into instead of the currency or the country yeah. For example, if it’s property, then we should understand the median income of the households in that country versus the property price in that country and then compare objectively. If it’s the stock market in that country’s stock exchange, then it’s the Price to Earnings ratio (PE). Just because it’s an advanced country, should we assign a higher PE for their listed companies? Well, your decision is your decision yeah. Happy following and investing.

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