Showing posts with label Forex. Show all posts
Showing posts with label Forex. Show all posts

Wednesday, 28 October 2015

Ringgit depreciation: what will I do?

A lot of people are (discussing about) converting MYR to foreign currency. You can see this from the foreign currency account offered by some banks, e.g., Maybank and Public bank. This was what I thought a few months ago. I have a second thought now: I decided to do nothing.

Firstly, the current exchange rate is about 4.2. I believe there is really not much room left for depreciation.

Secondly, it is really too little too late to convert to foreign currency now. This should have been done before it broke 3.8.

Thirdly, I speculated that the BNM will raise the overnight policy rate in September's meeting, as a move to "save" the currency. But BNM kept the interest rate unchanged. On surface, it shows that BNM does not want to intervene the movement of MYR. On a deeper level though, perhaps they see that MYR will go back to its reasonable value after those "exogenous factors" are gone?

Finally, I can profit from the KLSE to cover the currency depreciation. :D

Now that MYR seems to stabilize around this value, which is not that bad. A possible trend is to lingering around this point for sometime before changing direction. Whatever direction it goes, MYR should still be "safe" in a few years to come.

Sunday, 16 August 2015

Currency talk 3.0

In Currency talk (1.0) I made a bold statement that the day of AUD:MYR = 1:3 is over, with a "however":

If you really want 1:3 back in the days of 2012, you will have to hope for a quicker depreciation of MYR than AUD. But even if that happens, how worthless is MYR at that time? And how much you could do with it?

Back then, the currency was trading at about 2.80. According to BNM rate as at 14-8-2015 17:00, AUD:MYR is buying at 3.0112. Unbelievably, something that I wrote without much contemplation has become true in less than 6 months.

And NO, this is not due to the appreciation of AUD but a quick depreciation of MYR since July.

And NO, even the ratio of 1:3 is back does not mean that the MYR you converted back has the same value. The 1:3 today is completely different from the 1:3 back in 2012.

And NO, I do not want to see this coming as this means that MYR is getting worse. It looks like there is no signal that could stop the depreciation of MYR.

Human's brain is hardwired to survive. At the critical moment, protecting own interest is always the top priority. This is really no different from politics where it is all about self interest. Therefore, believing that the government could somehow help the currency is unrealistic. Because of this, I have to be responsible to my wealth. I thought that it is now a bit late to change currency, but whatever it takes, I have to come up with a Plan B.

Sunday, 9 August 2015

Currency talk 2.0

In currency talk, I mentioned that MYR has no cure but insidious depreciation. Unfortunately, the prophecy has become a reality. The chart below shows the trend of USD:MYR in the last 2 months:

(Figure obtained from Yahoo finance)

Point A:  30th - 1st July. The credit rating of Malaysia remains unchanged and the outlook was upgraded to become stable. MYR has rebounded strongly in the following day. Shockingly, this rebound only last for 1 day! And because of this conspiracy theory arises...

Point B: 7th July. USD:MYR broke 3.80 for the first time since 1998. I thought that 3.80 will be a strong psychological support since it was the rate pegged 17 years ago. But it did not look as "strong" as it should be. The slope of that day is relatively steep, showing that it breaks the support "just like that":

Point C: 22nd July. After breaking 3.80, I was looking for a rebound -- to at least 3.70. The rebound did happen, but to a much lesser extent and a much shorter period than I expected. This scares me a lot.

Point D: 7th Aug. USD:MYR was trading at 3.92. Why does it depreciate so fast? Perhaps political issues has lower the confidence of foreign investors?

Seeing the rate of MYR depreciation, Many Malaysians stocking up on Singapore dollars, US dollars as ringgit weakens. This basically tells me that now is not a good time to change money.

In 1997, the damage on Malaysia was relatively "mild" as compared to its neighbouring countries (except Singapore). Looking back, it was definitely a right decision to peg USD. But the current situation in Malaysia seems to be developing another financial crisis. Keeping in mind that US has still yet to increase the interest rate and MYR already like that scares me a lot. What if US really increases the interest rate this September? It is also possible that BNM may raise the interest rate in September meeting in trying to stabilize MYR. Interesting things might happen in a few months time.

Sunday, 28 June 2015

News by media, view by myself (part 2)

Example 2: Foreign Exchange

If you keep an eye on the global financial market, you will observe that 20 countries have eased their economy policies by cutting interest rates in the first 2 months of 2015. This does not include Australia which cut its interest rate twice (Feb 2015 and May 2015) and New Zealand which cut its interest rate this month.

A currency should fall when a rate cut devalues it, as the rate cut makes it cheaper for banks to lend, and for borrowers to borrow. The following shows the movement of NZD:USD right after the rate cut was announced:

NZD:USD after surprise rate cut

In this case, nobody knows that the rate cut was coming. Because it came as a surprise, the currency movement fell sharply, as it should. You will have no time to sell if you were longing NZD:USD.

Now, for the case of AUD when the second rate cut came in May 2015. Research analysts have forecast a rate cut on May 2015. It was almost a certainty that a rate cut would be announced after the board meeting. The movement of AUD:USD right after the announcement went like this:

AUD:USD after rate cut

This rate cut has not come as a surprise. Everybody knows it. Because of this AUD rises despite of RBA's rate cut. The reason was that the effects have already been "adsorbed" and "digested" by the market sentiment. If you read the news before the rate cut announcement and went to short AUD:USD, then you will become "water fish". When it is something that everybody knows, it just wouldn't go the way it was expected to be going.

Both cases have the same rate cut decisions, yet completely different reactions. Why? The difference lies in whether the news has been made known to the public in advanced. In NZ, it came as a surprise. In AU, it was expected. If you tried to make money based on news that everybody knows, you aren't going to get it.

[to be continued]

Sunday, 22 February 2015

Currency talk

"A while" ago I was so innocent and thought that the Kingdom of USD as the international currency will "terminate": to be replaced by CNY, thinking of how fast CN grows. I was wrong. This will not happen, at least for years to come.

In 2008 when US was trapped in the subprime crisis, they "invented" a bond buying plans, or the so-called "Quantitative Easing" -- as the euphemism goes, to stimulate the economy. Six years after the US stimulating programme, I do not see a single sign of weakness in USD. In fact, it becomes even stronger.

The experience of living in AU will let you aware that AUD is not a strong currency. Recently, Reserve Bank of Australia (RBA) cut interest rates to a record low of 2.25%. AUD has been depreciating against USD for some time since 2013, because the head of RBA  wants to see AUD to trade at 75 US cents, which I see as a really wise move, because AUD has no "qualification" to trade high (i.e. 1:1 ratio) against USD.

Strangely, many Malaysians mindset still fixed at the era of AUD 1: MYR 3.00+, or hoping that it will soon go back to 1:3+. I am sorry but this is not going to happen. Many people (Malaysians residing in Australia) do not like to hear this, I do not like to hear this as well, but it is a fact. The day of AUD 1: MYR 3.00+ is over. Now it is only AUD 1: MYR 2.80. And this is still with a recent rapid depreciation of MYR. If you really want 1:3 back in the days of 2012, you will have to hope for a quicker depreciation of MYR than AUD. But even if that happens, how worthless is MYR at that time? And how much you could do with it?

A friend of mine said he wanted to put AUD in bank to wait for it to go up. Frankly, how stupid can this thought be? Going back up? No way.

Whenever you see newspaper headlines of "MYR hits lowest in XX months/year against SGD" etc, you will see people saying the day of SGD 1: MYR 3.00 is coming next month/year. Please, even with the most basic knowledge of forex, one will know that 1:3 is not happening in at least years. Having said that, SGD is a rather strong currency in my opinion.

The European Central Bank has announced a stimulating programme last month. Well, when an idea/method is implemented for the first time, the effect is always good. But will the same trick work again for EUR (or JPY)? And how long can Greece stand before something happen? People have been speculating a collapse in EUR too. I bet this is something EUR's "rival" wants to see.  Will it happen? Only time will tell. But I do not look good on EUR.

No cure but only pernicious depreciation. The self-interest gained by you-know-who politically will cause the country to pay the price economically. Maybe 5 more years to sustain?  In these few months MYR has depreciated "considerably" against USD, and is now trading at USD 1: MYR 3.60+.

I am sorry but I do not look good at this currency. If I were to choose a currency to keep, my first choice would be USD, followed by SGD.

I am not a forex expert neither I know much about it. I just blow some water here. Don't hit me if you want AUD to go high.

Friday, 16 August 2013

MYR 马币贬值

我不想在这里谈外汇,因为我对这方面一知半解。可是近期的我会一直打开 Ringgit Forex Exchange 来看。我也不是有追外汇兑换率的,只是这几个星期,MYR 真的是吓坏了我。而且上个星期 开始动回 Options 主要马币失去信心。

myr forex

1. 记得去年可以令吉人民币是1:2的。现在什么?剩下1.86而已!1对2去了哪里?

2. EUR:MYR印象之中之前都是在 4:1 徘徊的。walao,今天打开来看,4.37!自己吓了一跳!

3. SGD 新币。不用了。创10新高。报纸大势报导了。记得2004的2.25的。今天已经来到2.58了。

4. GBP 英镑。之前明明没有超过5的。竟然几个星期里面来到 5.12.

5. 美元。哪里还有之前看到的3.0X?天,已经来到3.27了!