Wonder why my SGD worth so little at times?

Due to the large scale protect with flights cancellation and cheaper to travel, some may feel it must be the best time to change Hong Kong Dollar (“HKD”) with our Singapore Dollars (“SGD”). This is not the case if you check our partner Money Changers (https://cashchanger.co/singapore/chart-sgd-to-hkd).

Photo: SCMP - https://www.scmp.com/business/article/3017762/outlook-hong-kong-retail-rents-bleak-trade-war-and-protests-dampen-sales

Here are some factors that impact currency values and exchange rates.

1. Government Influence Image from Designed by Macrovector / Freepik

Most national governments can only regulate exchange rates indirectly as most exchange rates are open to the foreign exchange market. Some countries, like China, however, can direct fix and change the rate. In recent times, China has affected the US Dollar as it is loosely pegged to it.

Some government may use various tools to influence their currency exchange rate against foreign countries. This is usually performed by the nation’s central bank implementing policies or regulations to influence the supply and demand of money.

2. Interest Rates

In most countries the interest rates are determined by central banks managed by the government’s policies. This refers to the interest rates where banks can borrow from the central bank. This would have an impact on inflation and value of the currency. Usually, higher interest rates would make it more expensive to borrow money and thus increase the value of the country’s currency.

3. Inflation

It is a measure of the rate at which the average price of certain goods and services in an economy increases over a period. High inflation is more likely to decrease the country’s currency value, yet low inflation also does not guarantee a strong currency. How it impacts the currency is largely due to the perceived attractiveness of holding on to it. This perception is also influenced by the economic and stability of the nation.

4. Balance of Trade Image from Business vector created by fullvector - www.freepik.com

This refers to the difference between a country’s imports and exports for a given period. If a country imports more goods and services than their export, it is known to have a trade deficit and the opposites refer to a trade surplus.

When a country has a trade surplus, businesses would require more of the currency to make purchases and thus the value increases. Balance of trade would impact currencies where the market determines the value and less so when it is fixed or pegged to another currency.

5. Government Debt

Every nation would need to borrow money to fund specific projects or governmental expenditure like education, health care and defence. A country could do so through bonds where it is offered to the general public to earn interest on their money over a fixed deposit term.

The key is the ability of the government to pay off the debt. If there is perceived confidence of the ability to repay the debt, the demand for the currency is high to purchase more debt and thus a stronger currency

6. Economic Performance Image from Infographic vector created by rawpixel.com - www.freepik.com

Investors would favour and seek stable countries with strong economic performance to invest. Strong economic growth would also lead to more opportunities to conduct business and thus the demand for the currency will increase leading an increase in value.

Do I change HKD now?

We see that HKD has been stable over the past 2 months despite the protest. This is largely because HKD is historically pegged to the United State Dollar (“USD”) and can move slightly within a fixed band. In the same period, we see that USD has steadily strengthened against SGD, despite the interest rates cut in the US. As for HKD to SGD, please check our website before deciding 😊. (https://cashchanger.co/singapore/sgd-to-hkd?val=1&valtype=have)

For the latest exchange rates, visit https://cashchanger.co!
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