The theme of today’s post is currency exchange rates.
I just realized that today (or rather Friday evening) is the start of the week-long semester school holidays here in the little red dot. No wonder there were so many parents walking around with their kid the last 2 days. And no wonder so many colleagues are on leave the next week too!
The Straits time travel page brought up an interesting topic – how the evolving currency exchange rates between countries influence ‘travel flow’ of people. While the focus of the article is on how Australia is now attractive from both a cost standpoint along with its offering for touristic pursuits, the deeper meme we can derive from the article is that currency exchange rates do matter.
Here is how the Singapore-Australian dollar relationship looked like over the past years:
Now this does not go far back enough in my opinion (and for my own examples to cite), but that will have to do for now.
From the graph, you can see that the current exchange rate level of parity is actually not that much of a big deal. The period post the Great financial crisis of 2008 was when the AUD actually touched 0.93 to the Sing – ie the Singapore dollar can actually buy nearly 7 cents more of the Australian dollar. For a broad range of folks from students studying down under or those with mortgages (on their 2nd or 3rd properties in Perth for example), the lower exchange rate was boon. Nevermind that it swiftly reversed course and caused a lot of gnashing of the teeth…
I recall back in the period around 1998-2001, the same thing happened when I was working in China. The exchange rate had dropped such that we made two trips within 6 months to Cairns (snorkel the Great barrier reef) and Sydney (hiked in the blue mountains).
Someone quoted in the Straits Times article was supposed to have last travelled to Australia 20 years ago – sounds like the time in 1998-2001! As my colleagues from down under says, many peoples are lured to Australia’s good food, weather (hmm, not sure though) and general living environment. Of course tourism authorities will broadcast how the trendy shopping, eating and sightseeing are very plus factors. Not that I do not agree.
It has been the same with Japan and since the last year, Malaysia.
We seem to be at a turning point, one in which every leader of economic policy across the world are engaging in some sort of currency debasement. All this in the effort to spur consumption (and borrowing?) to get the economy kicking alive again.
For those residing in Singapore, it has been a rather profitable couple of years for anyone doing some traveling as the Singapore dollar had appreciated tremendously against a basket of currencies both in this region (southeast Asia) but also across the world. I hope the MAS (monetary authority) will not change its stance and join the currency race to the bottom. Let’s not even talk about the impact on savings and investments.
Appreciation of Singapore dollar
You will see that it is now cheaper to travel from Singapore to places such as South Africa, Russia, most of Europe and most recently – the UK. The pound had really fallen off below the 2.0 handle. Those planning on shopping trips to the UK or Paris will no doubt benefit from both the weak Sterling and Euro. Our most recent booking for a trip to Russia was lower in price compared to a year ago!
And this is where behaviorial economics comes into play.
In closing, a couple of other notes from a quick and broad sweep across a number of reading sources:
- Gulf airlines are racheting up their push for ‘market share’ of passengers in the Asia-Europe route. Interesting comparison of prices of these airlines against stalwart Singapore Airlines made today in the Straits time travel page. Boy are they in for a challenge to retain those who would relish to save a few hundred dollars on their trips.
- Retirees or wealthy individuals moving to live permanently aboard cruise ships that actually lets passengers vote where the ship should sail next! Basically you buy your “property” for US$1.5mln (small studio) or perhaps US$15mln for a penthouse. Conservancy charges apply…
- Robot bar tenders on the Harmony of the Seas, the largest cruise liner (can carry 6000 passengers) that was recently launched and made her maiden voyage. This is a sea trial though and no passengers are aboard.
- The ice bridge at Perito Moreno has collapsed! Bummer! It was part of the bucket list item to cruise around south America and visit Los Glaciares national park! The “bridge” is supposed to be 250m wide and 70m high. Seems like the climate change folks are going to have a field day citing this as evidence we need to pay a tax or go back to the stone age. Eventhough some scientists pointed out this was due more to physics than climate change.