Personal Finance 101: In my opinion, the strongest currency in the world is SGD

Personal Finance 101: In my opinion, the strongest currency in the world is SGD

Currency exchange is a tool which countries try to influence for the benefit of their own economy

I have written many times that the currency fluctuation should just be based on the trade of goods and services. Well, unfortunately there is no such thing as fairness, so the currency exchange is also a tool which countries would try and influence for their own economy’s benefit. Stronger nations benefit, weaker nations would have to just ‘let it go’ and hope for the best.

Currency is definitely not influenced by trade alone because if it’s just trade, then countries with trade surplus should see appreciation in currency and countries with a trade deficit should see depreciation of currency.

Today, we look at a currency I personally think as the strongest in the world. My definition is not on exchange rate but on the trend of the currency over a long period of time. The below is how SDG has been trending versus the usual prominent currencies in the world. Source: google.com 

Versus the biggest economy in the world – US$

SGD has continued to appreciate in value versus the US$. Once upon a time, SGD was exchanged as low as US$1 to S$1.75 but today the latest exchange rate is US$1 to S$1.71 and from the readings thus far, the Singapore government would prefer a strong currency as this is more beneficial versus a weaker currency.  

Versus the second strongest reserve currency in the world – Euro

A long time ago, 1 Euro can be exchanged for over S$2. Today, it’s just 1 Euro to S$1.46 yeah. In other words, if one were to use the SGD to invest into Euro denominated assets and the rate of price increase was not above the exchange rate depreciation, then today the investor would have suffered loss when they sell that asset and convert it back to SGD.

Versus the oldest currency in the world – Pound Sterling

It used to be 1 Pound Sterling equals to around S$3. Yea, it was that far apart. Today, the number is 1 Pound Sterling equivalent to S$1.68 and this meant that it has gotten very much more expensive for a British tourist to visit Singapore and buy happily because the value they could get from using 1 Pound Sterling has dropped by close to half. 

Versus the country where many love to buy properties for investment – AUD

A long time ago, AUD was stronger in exchange versus SGD. It was SGD1 to just AUD0.79 but today, it’s a ‘smaller’ currency when compared to SGD. SGD1 can exchange for more than AUD1 today. In other words, someone earning AUD as their pay could buy more things in Singapore previously. Today, someone earning SGD would find it cheaper to spend in Australia instead. How times have changed.

Versus the country which everyone considers stable and one of the top economies in the world – Japanese Yen.

If a bowl of ramen was 600 Yen a long time ago, a Singaporean tourist would need to pay close to S$10 for that bowl of ramen. If the ramen is still 600 Yen today, a Singaporean tourist would need just S$5.60 to eat it. In other words, the purchasing power of Singaporean earning SGD has increased tremendously versus the times when Japanese Yen was stronger versus SGD,

Versus RM which has depreciated! 🙂

Using the same period as all the above currencies, it used to be SGD1 to RM2.21 yes, I remember those days. Now, it’s SGD1 to RM3.49 and it does seem that everything’s bad. Stay focused yeah. When it comes to investment, staying focused will help tremendously. If we truly believe SGD denominated assets are way better, then by all means go ahead and buy now so that in the future, you could enjoy the currency gains too. Just need to note that with this exchange rate, the type of assets we could buy will be very limited.

However, if we are to believe that if we invest into the right assets, the capital appreciation would help us hedge all these exchange rate fluctuations, then stay focused and find the right asset to invest too. For example, we could have bought a landed property way back in 2003 and the price could have been easily just RM250,000? Today, that same property could have been RM1.6 million? The return is thus over 6x and the gains is way higher than any currency losses over the same period of time.

It’s our decision to make. Just waiting for the currency to appreciate is not the best advice

No one knows what will happen in the future yeah. I continue to believe the Singapore government would prefer a strong currency. Meanwhile for Malaysia, we just have to balance between growth and currency. It is not very clever to suddenly become too expensive quickly versus some close neighbours which could just attract all the FDIs.

Meanwhile, do you know why Malaysians are still visiting Japan or the UK? Please do take a look at our currency versus the Yen or Sterling Pound. We are doing just fine. In fact we are slightly stronger too. Happy visiting Japan and the UK lah. Can skip the countries which has appreciated and just visit the ones which are same rate or even lower, slightly.

Not just Japan lah. Can also visit UK too. Ringgit is stronger versus them too. yes, I know very well because I studied in the UK during the financial crisis times. At the time, it was over RM7.50 to 1 Pound Sterling!

Always have enough knowledge and make the best use of situations. Generalising does not help and doing nothing is as worse as it gets when it comes to investing. Invest and then wait for appreciation is not the same as doing nothing and wait yeah. Cheers.

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