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Why are "experts" always saying buying USD is good?

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Old 14-06-2018, 12:01 PM   #1
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Why are "experts" always saying buying USD is good?

Who else is bullish on USD/SGD and believe it will keep rising?

USD/SGD will not rise. It will more or less stabilized at around 1.31 to 1.35. Predictions of it hitting 1.4 or 1.5 are by delusional people.

Here's a fact: USD/SGD has been depreciating since 1988. Before 1988, it was comfortably above 2, in 1988 it was barely 2, crashed to just above 1.4 in 1995 went back to 1.8 in 2002 and has crashed back down since.

When asked why everyone thinks the USD/SGD will rise back to its glory levels, the answer is often because the Fed is going to raise interest rates. While this underlying logic is sound, that alone is not what currencies are about. If this was the case, then the AUD and NZD, both high interest yielding currencies would reign supreme.

Donald Trump doesn't want a strong USD. His campaign had revolved about fighting to bring back jobs to America and Americans. That essentially is the whole trade war thing and the very first weapon in a trade war is depreciating of currencies. Now I'm not saying the USD is going to go on a freefall and USD/SGD would be 1:1, but my point here is that there will be downwards pressure on the USD, by its own goverment/president.

The SGD on the other hand, has been growing stronger over the years, against all currencies. This is because Singapore is no longer a fishing village. We have since evolved into two hubs-knowledge and financial. We need to attract foreign "talents" and the easiest way to do so is via higher pay and that can be easily achieved via a stronger SGD. On the other hand, Singapore is also well known for her offshore banking. In other words, there is also a strong demand for SGD, driving it upwards.

I really do not see how people can be super bullish on USD/SGD.
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Old 14-06-2018, 05:06 PM   #2
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Exchange rate is a controlled tool.
There's no economy theory to it.
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Old 14-06-2018, 05:23 PM   #3
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The US dollar is only a better store of value (but really, no currency is a great store of value due to inflation) if you are based in a poorly managed 3rd world country like Argentina, Turkey, Venezuela, etc.
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Old 14-06-2018, 05:24 PM   #4
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Fake news trusted con job
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Old 14-06-2018, 05:27 PM   #5
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Actually usd has been dropping for quite some time despite of rising interest rate.

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Old 14-06-2018, 10:54 PM   #6
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Actually usd has been dropping for quite some time despite of rising interest rate.

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Exactly! Last year USD/SGD was 1.41 and despite more hikes, it has fallen to under 1.34. USD/JPY is also struggling. I really don't know how people can be so bullish on USD! Delusional!
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Old 14-06-2018, 11:33 PM   #7
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When asked why everyone thinks the USD/SGD will rise back to its glory levels, the answer is often because the Fed is going to raise interest rates. While this underlying logic is sound, that alone is not what currencies are about. If this was the case, then the AUD and NZD, both high interest yielding currencies would reign supreme.
I remember seeing a thread yesterday where someone asked why did USD not rise despite interest rates confirmed rising? but its gone now, he deleted it?

You're right that when asked why USD will rise, most people say increasing interest rates. But they tend to forget one thing, when US raises interest rates, the countries have to follow suit sooner or later or they would be at a disadvantage. As investors would start to shift their funds and monies into the US due to higher and safer returns (increased interest rates). Also, interest rates are merely one of the tools that are used to influence the strength of the currency, there are many factors which affect currency strength.

I agree that based on what currently Trump is doing though, he definitely would not want a strong USD. Since he is trying to bring back jobs to US, it would mean that the exports of goods out of US will rise as more products are being produced in the US. So what happens with a strong USD? Those products become more expensive due to a strong USD and people will turn to other countries' exports to look for cheaper alternatives.
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Old 14-06-2018, 11:43 PM   #8
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When asked why everyone thinks the USD/SGD will rise back to its glory levels, the answer is often because the Fed is going to raise interest rates. While this underlying logic is sound, that alone is not what currencies are about. If this was the case, then the AUD and NZD, both high interest yielding currencies would reign supreme.
Errm, mate, AUD and NZD arenít high-yielders any more.

Donald Trump doesn't want a strong USD. His campaign had revolved about fighting to bring back jobs to America and Americans. That essentially is the whole trade war thing and the very first weapon in a trade war is depreciating of currencies.
So this bit is sort of true. I think Donny Two Scoops would love to tank the dollar, even if he doesnít explicitly realise it; heís got this bonkers fixation on the US trade deficit, and tanking the dollar would absolutely reduce the trade deficit because Americans suddenly wouldnít be able to buy as much stuff from overseas.

That said, he doesnít have enough grasp on policy to realise that a weaker dollar is what he wants. The thing that would weaken the dollar, at this point, is if the Fed decided to slow its hikes, and I donít think thatís likely.

The SGD on the other hand, has been growing stronger over the years, against all currencies. This is because Singapore is no longer a fishing village. We have since evolved into two hubs-knowledge and financial. We need to attract foreign "talents" and the easiest way to do so is via higher pay and that can be easily achieved via a stronger SGD. On the other hand, Singapore is also well known for her offshore banking. In other words, there is also a strong demand for SGD, driving it upwards.
Well hang on: thatís backward-looking. Singaporeís economy has evolved, but thatís past-tense; Singapore is now very much a first-world economy, so the currencyís not going to get a huge tailwind from foreign direct investment any more.

In the mid term at least (letís say a year or two) I think thereís a pretty good argument for a weaker SGD against the USD. Singaporeís economy is relatively slow; the USís is relatively strong. Singapore manages its economy through the exchange rate, so the MAS is going to want to weaken the SGD to keep Singapore competitive. Itís super super broad-brush, but thatís my thinking for why I think USDSGDís going to end up higher over the next couple of years.
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Old 15-06-2018, 07:15 AM   #9
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What does the currency futures market think?
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Old 15-06-2018, 09:29 AM   #10
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Easy.

1. Banks are quiet on making calls for a rising USD. Always bet against their house view for retail.

2. The fact that you are making such a call and the underlying presumption that you are retail, means that by default you are wrong over 80% of the time.

Itís a lot less to do with economic fundamentals and a lot more to do with market psychology.
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