Singdollar soars to 4-year high against Aussie currency

The Singdollar’s rise against the Aussie currency is partly due to weakness in Australia’s mining sector putting downward pressure on the currency, while Singapore’s strong trade position has boosted the Singdollar. -- PHOTO: BLOOMBERG
The Singdollar’s rise against the Aussie currency is partly due to weakness in Australia’s mining sector putting downward pressure on the currency, while Singapore’s strong trade position has boosted the Singdollar. -- PHOTO: BLOOMBERG

Tourists, students and investors will be rubbing their hands with glee after the Singdollar hit a four-year high against the Australian currency yesterday.

Anyone studying at Australian universities or contemplating buying property or visiting Down Under will get a bit more bang for their Singapore buck now.

The exchange rate was at S$1.1411 to the Aussie dollar yesterday, or to put it the other way round, one Singdollar was buying 87.63 Aussie cents, the best it has been since July 2009.

The Singdollar's 0.6 per cent rise against the Aussie dollar yesterday - partly caused by the greenback's surge on the back of strong US growth figures - underlines what has been a dramatic shift in recent months.

In April, A$1 was worth S$1.3071, meaning one Singdollar could buy only 76.51 Aussie cents - 13 per cent less than it can get now. Or to put it in real terms: a A$10 pizza at Sydney's Bondi beach, which would have cost you S$13 in April, will now set you back only S$11.40.

The change is partly due to weakness in Australia's mining sector putting downward pressure on the currency while Singapore's strong trade position has boosted the Singdollar.

"The Australian economy is going through a period of transition that is hurting the currency," said Dr Gareth Berry, a currency strategist with UBS.

"It had been depending on mining for growth. But new investments have reached a peak and are likely to recede."

Dr Berry said Australia's retail, manufacturing, tourism and education sectors have to step into the gap left by mining. These industries have been depressed by years of currency strength so a weaker Aussie dollar will help.

The Aussie dollar has also been weak against other currencies, hitting a three-year low of A$1 to 89.27 US cents yesterday.

UBS economist Edward Teather said the Singapore dollar has recently been a bit stronger than its peers in South-east Asia and Australia, although it is weaker against the US dollar.

Singapore has a current account trade surplus - selling more exports than buying imports - which boosts the dollar, he added.

It would be impossible to get the rate of S$1.1411 to A$1 at the moneychanger or bank but some Singaporeans will still benefit.

"Overseas students can save on accommodation, transport costs, health-care fees and communications costs," said Dr Timothy Chan, director at the academic division of SIM Global Education. Tuition fees will also be less when calculated in Singdollars.

Mr Ku Swee Yong, chief executive of International Property Advisor, said property buyers will enjoy the exchange rate if they go in now. However, education and property are long-term commitments and there will likely be fears over future movements.

Dr Chan said that those unsure about studying Down Under may worry that the Aussie dollar will bounce back to S$1.20 or higher.

By contrast, property buyers fear it will weaken more.

"If they anticipate (more drops in the Aussie dollar), people may hold back their decision to purchase property," said Mr Ku.

More Aussie dollar weakness will reduce an investment's value in Singdollar terms, although there may not be any fundamental issues with real estate, he said.

jonkwok@sph.com.sg