Monday, December 01, 2014

Money vs Currency

Currency performance is but a true reflection of the underlying dynamics of economic growth, inflation, a country's competitiveness and revenue streams ... among others. The table below reveals all that in one go. 

HKD is on a false sense of security. It is tied to the USD and will bring about havoc in its economy as it does not deserve the "low interest rate environment couple of good economic recovery", all the while the HK side has to contend with a slowing China economic engine  plus a deflated shipping industry,and a flattening housing/real estate market in China". The strong USD basically causes a highly uncompetitive kick to its travel/conference industry. Its a false sense of security which translates into a housing market that is primed to go off a cliff anytime soon - what with the usually strong currency, a crackdown on corruption in China (which ay lead to cash withdrawals).

IDR - Still on a high from the recent elections with a promise to reduce corruption on all levels. Even though oil dependency has lessened, it is still a substantial portion. Hence methinks IDR has a long way to fall if oil prices stay below $70 for a few more months.

Yuan & Rupee - Both have had tough restructuring to do in their economies with India having it harder over the past two years. Unlikely to see further erosion of their currencies as they are already happily competitive with a technically undervalued currency.

Singdollar - The lack of dependency on oil will see an actual boost to Singapore via lower oil prices. However, their dependence on regional trade will hit their outlook. Currency may ease slightly going forward.

Ringgit - If you look at the ringgit vis a vis the rest, we are doing very well thank you. Oil prices is a substantial contributor to the economy, esp our budget, but thankfully our budget and the way we handle our allocations also means there are a lot of "excesses and capacity" to be cut without hurting the real economy. Too many ongoing projects to dislocate the economy. A slowdown in awarding of oil and gas packages will not be as impactful as it does not really trickle down. Still, the ringgit may weaken a bit more oil prices stay below $70 for too long.

Look at the last 4 countries on the list, its oil oil oil ... plus Russia has embargo and Ukraine issues to boot. Venezuela already devalued its currency and should need to do it again very soon. Argentina will need more money or risk defaulting again. Brazil is not out of the woods too. 

p/s money is personal, currency is government ...


2 comments:

solomon said...

In these days, what in your pocket is yours. Keep it hot hot.

Yana Stone said...

To my opinion, dollar and euro are the most stable currencies in the world. Maybe I am wrong, but I just do not believe in other ones as much as I’m confident in US dollar. Also English pound is strong and stable enough but now its stability can be damaged because of economic situation. It’s especially necessary to pay attention to the currency when you apply for a loan. I experienced an unpleasant situation with significant change of currency rates, so it’s important to be careful.