Do you still remember the exchange rate of 1Aus$ to 1SGD$ back in early 2009? It was 1Aus$ = 0.98SGD$, yes it ever went lower than Singapore dollar during the bottom of the economy crisis in 2009. It plunged from 1Aus$=1.30SGD almost 30% drop. During that time, I still remember one of my colleague told me that she just changed SGD to Aus$ a month before the Aus$ drop to pay for her daughter apartment in Perth. No one expect the Aussie to drop below Singapore dollar but it happened within a short time. Imagine if my colleague change her SGD to Aussie dollar only after the Aussie dollar drop, she would immediately make a 30% gain on her property just from the currency depreciation alone.
She might not feel better as the Aussie dollar is now appreciates to the original level of 1Aus $ ==1.30SGD. You might think further …….Gain 30% earlier then sell now changing back Aus to SGD gaining another 30%...WOW!! Too good to be true man! If we can time the market at any single day we would be rich!!
This is the 1st time I get to know that the value of currency can drop so drastically within such a short time, excluding the moment when Asian currency was attacked by George Soros. I was then told by my Aussie friend that the Aus $ is closely related the economy (this one everyone know!!), when the economy is down so does the price of raw material required for manufacturing due to lower demand. And given that, Australia GDP is heavily contributing by the export of Ore and other raw material, lower price of raw material thus driving the GDP of Aus down. With lower GDP, Aus will have lower foreign reserve, thus Aus dollar depreciates. However, with the economy recover rapidly under the stimulus plan by each country loosing their monetary policy the demand pick up and the price of raw material soars in a short time. Thus the swing of Aussie dollar.
Besides the good return of principal due to appreciation, the Aussie dollar also posts a good return of interest from fixed deposit. Shown below is the interest rate by DBS bank.
As compare to the SGD FD which merely give 0.1% interest p.a it is still a good place to park your spare cash. Be aware of the risk if you plan to invest in FXFD whereby you might get back the return lower than the principal amount you park in the bank.
