Why you should be thinking about Foreign Exchange (FX) as part of an investment portfolio?
Why you should be thinking about Foreign Exchange (FX) as part of an investment portfolio?
What has FX got to do with me?
At a time where the pandemic has led to lockdowns or quarantines, which in turn has seen a drastic reduction in across the border travel, would changing some precious Singapore Dollar into another country’s currency still matter to you at this time?
The thing is, FX is not just about changing currencies into that of the country you are visiting. It can also form an important part of your investment portfolio, and you should be aware of its impact.
Why currency trends matter
It is important to pay attention to the overall trend of currencies to understand its impact on your investment portfolio.
For example, in March 2020, when it became increasingly clear that the Covid-19 infection was developing into a global pandemic, the USD/SGD moved from a low of about 1.37 to a high of 1.46 in a space of that same month alone.
This occurred as investors fled towards the safety of US Treasuries, in turn driving up demand for the US Dollar. If you have had a need for the US dollar during that period of time, you would basically have to pay much more in SGD to get the same unit of USD.
Similarly, as the US Federal Reserve announced massive plans to increase monetary supply to prevent a global recession, the supply of US Dollar became a flood, causing the USD to trend lower subsequently from that high.
If you were holding US-dollar based assets, your returns would have suffered when translated back into the Singapore Dollar currency.
So, it is clearly important to pay attention to currency market trends, a topic we will examine in subsequent articles.
With OCBC new FX execution platform, we provide you with seamless and secure exchanges of currencies at attractive rates, along with a constant access to wealth insights to keep you updated on the latest FX market trends.
Start trading FX with OCBC Digital today!
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Foreign Currency
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