Using currency fluctuations to your advantage

Foreign exchange, or forex for short, is the conversion of one country's currency into that of another. Most of us use this when travelling. Forex traders do this online but it is a high risk investment with potential losses if not done right. While foreign exchange is affected by many factors such as politics, economic strategy, economic outlook and central bank policies, there are some simple, everyday ways in which we can take advantage of these fluctuations. Here are some of them:

Travel

This is perhaps the most straight-forward way to take advantage of another country's weaker currency. For example, following Brexit, the pound has taken declined substantially from last September's 2.225 against SGD to the current 1.77. This means that the local currency has more purchasing power now, making your travel expenses in UK cheaper; it's almost like a 20% discount!

Work in a Country with Stronger Currency

This is probably one of the reasons why we have a lot of Malaysians working in Singapore. Imagine earning an amount which gives you double or triple the purchasing power in your country. You would find that owning a home, paying for your bills, groceries and food so much cheaper – which is also why Singaporeans love to go to Malaysia for a day-trip and stock up on groceries!

For those who have the chance to work remotely, that's even better since you will be able to immediately spend in your home currency. This is also a reason why on freelance sites, it is typical to find freelancers from emerging countries like India with weaker currencies since they will be able to “earn more” this way.

Set up an import-export trade

Trade has become so globalised, and the advent of the internet has made online buying so much easier. You don't even need to do this full-time to take advantage of a side business by importing your goods and supplies from a country with a weaker currency. For instance, when you shop on some of the online stores in Singapore, you will find that a lot of their products are imported from wholesalers in China. Because the cost of production in these countries are cheap, you'll be able to earn quite a big margin by selling them at local prices.

Studying overseas

Be it for your own further studies or sending your kids overseas for a graduate course, you may want to look for a country where the currency is cheaper than your own. Unfortunately for Singaporeans, most parents prefer to send their kids to more prestigious universities in Western countries, which usually have high currency valuations. But given the choice between these countries, you can still choose a country with the currency closer to the Singaporean dollar, which is also why Australia continues to be one of the top choices for Singaporean students. Remember that this not only impacts your school fees but living expenses as well.

(By Lynette Tan)

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