Essay On Exchange Rate

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Recommended: Positive and negative effects of international trade on the economy

2.0 Introduction

The currency exchange rate gives a great influence to the development of a country. The tourism, consumption and human resources are the three most obvious sectors that affected by currency exchange rate. The Malaysian Ringgit (MYR) to Singapore Dollar (SDG) exchange rate is drop year by year since 1980. This issues give impact to Malaysia especially Johor state, since Johor is just a strait far from Singapore. In this chapter, the information about the currency exchange rate, Malaysia and Singapore is given.

2.1 Currency

According to Hornby (2005) in Oxford Advanced Learner’s English-Chinese Dictionary, currency is defined as “the system of money that a country uses”. Every country uses own currency or shared same currency with other country. In Malaysia, the currency used is Malaysian Ringgit (short form: MYR; symbol: RM), while in Singapore is Singapore Dollar (short form: SGD; symbol: $). The United State Dollar (short form: USD; symbol: $) used in many country such as beside than their own currency.

In these different currencies, there are eight most tradable currencies choose by Lee (2013). The ranking is shown on table below.

Table 2.1: Eight most tradable currencies
Ranking Currency Central Bank
1st U.S Dollar (USD) Federal Reserve (Fed)
2nd European Euro (EUR) European Central Bank (ECB)
3rd Japanese Yen (JPY) Bank of Japan (BoJ)
4nd British Pound (GBP) Bank of England (BoE)
5nd Swiss Franc (CHF) Swiss National Bank (SNB)
6nd Canadian Dollar (CAD) Bank of Canada (BoC)
7nd Austrian / New Zealand Dollar (AUD / NZD) Reserve Bank of Australia / Reserve Bank of New Zealand (RBA / RBNZ)
8nd South African Rand (ZAR) South African Reserve Bank (SARB)

2.2 Foreign Exchange Market (FOREX)

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... middle of paper ...

.... Singapore has a surplus in cash of 9.0% in term of GDP in year 2012 and this show a healthy economic phenomenon but in year 2013 the cash surplus only achieved 0.7% of GDP. The central government debt of Singapore in year 2012 is 115.1% of GDP and 113.6% of GDP in year 2013.

Singapore had exported 200.7% of GDP goods and services in year 2012 and this is equivalent to $435.8 billion. 178.5% of GDP of goods and services has imported to Singapore in year 2012. From these data, Singapore is highly demand on importation and exportation for the economic growth.

Singapore’s deposit interest rate in year 2012 is 0.1% and lending interest rate is 5.4%. In Singapore, doing investment is better than save the money in bank because of the low interest rate. The inflation rate of Singapore based on consumer prices is 4.5% and 2.4% for year 2012 and 2013 respectively.

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