The foreign exchange market (Forex) is seen as a zero-sum game. When someone gains from a favorable exchange rate between two currencies, a corresponding loss is also suffered somewhere else.
Singaporeans get elated whenever they see the Singapore Dollar (SGD) trading at a historical high against the foreign currencies of the countries that they want to visit. This includes the Japanese Yen, Australian Dollar and Malaysian Ringgit.
On 24 October 2023, the Singapore Dollar (SGD) traded at a historical high of 3.50 against the Malaysian Ringgit. As of 31 October 2023, it has retracted slightly and is now trading at 3.48.
Who exactly are the winners when the SGD trades favorably against the Malaysian Ringgit? And if Forex is a zero-sum game, then who are the groups that suffer from the SGD appreciating against the Malaysian Ringgit?
#1 Winners: Singaporeans Who Travel To Malaysia
The first group of people who will benefit from the SGD appreciation against the Malaysian Ringgit are Singaporeans traveling to Malaysia. Whether we are going for a holiday, stocking up on groceries regularly in Johor, visiting our relatives in KL or just want to enjoy cheaper car-grooming services in Malaysia, a stronger SGD means that we will get more bang for our SGD in Malaysia.
So whether it’s going to Genting Highlands or a day trip destination to Malaysia less than two hours’ drive from Singapore, there are now more reasons to brave the queue at the Johor-Singapore Causeway.
Read Also: Is It Better To Change Your SGD For MYR In Singapore Or Malaysia?
#2 Winners: Malaysians Who Work In Singapore But Live In Johor
The Johor-Singapore Causeway is the world’s busiest border crossing with an estimated 350,000 travellers using it daily. Given the SGD/MYR exchange rate, the higher wages earned in Singapore, and the lower cost of living in Malaysia, it’s easy to see why.
From a personal finance standpoint, it makes financial sense for Malaysians living in Johor to endure the daily commute across the causeway to work in Singapore. Doing so allows them to earn a higher salary that is paid in SGD, while still enjoying the lower cost of living in Malaysia.
With the SGD appreciating against the Malaysian Ringgit, it means Malaysians working in Singapore will enjoy higher wages once it’s converted to the Malaysian Ringgit while still enjoying the lower cost of living in Malaysia.
#3 Winners: Singapore Companies With Operations In Malaysia
It’s common to find Singapore companies with business operations in Malaysia, or having some parts of their business supply chain based in Malaysia. These may include suppliers, vendors, partners and staff who work for them in Malaysia. Often, these services rendered from their business operations in Malaysia are paid for in Malaysian Ringgit.
With a favorable exchange rate, Singapore companies will now be paying a lower price (in SGD) for services and supplies that they purchase from the business operations that they have in Malaysia.
Groups That Will Be Negatively Affected
Unfortunately, there are also groups of people who will not be ecstatic with the SGD appreciating against the RM.
Affected Group: Singaporeans Who Invest In Malaysia
In a recent joint statement by PM Lee Hsien Loong and PM Dato’ Seri Anwar Ibrahim at the 10th Singapore-Malaysia Leaders’ Retreat, it was shared that Singapore is one of Malaysia’s top sources of foreign direct investment in 2022, contributing 8.3% of Malaysia’s total FDI.
Unfortunately, for individuals who may have invested in Malaysia’s assets such as properties or stocks, the weaker Malaysian Ringgit would translate into a foreign currency loss for them in SGD, even if the prices of these assets remain the same.
Affected Group: Those Living In Johor
With the weakening Malaysian Ringgit, inflation is one of the inevitable effects that Malaysians will bear. This is because imported goods become more expensive when a currency weakens.
For the state of Johor particularly, the weakening of the Malaysian Ringgit will not only lead to higher inflation but may also be exacerbated by Singaporeans looking to purchase cheaper goods in Johor. Due to the proximity of Johor and Singapore, many Singaporeans can buy their groceries and other essentials in Johor to take advantage of the stronger SGD and to lower their own living costs.
The result is that Singapore buyers will increase demand for goods and services in Johor. If supply does not keep up with the demand, prices will increase and this will increase the living costs for those in Johor.
This could be less of an issue for Malaysians working in Singapore as they will also enjoy an increase in their salary due to the stronger SGD. However, for residents in Johor who do not work in Singapore, the weaker Malaysian Ringgit would be a cause of concern, especially if inflation continues to rise unabated.
Read Also: 11 Things To Take Note When You Cross The Causeway
The post The Singapore Dollar Hits 3.50 Against The Malaysian Ringgit: 3 Groups Who Will Be Benefit (And 2 Groups Who Won’t) appeared first on DollarsAndSense.sg.
0 Mga Komento