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Keeping savings in Australian dollars - is it a wise move?
26 Feb 2014 (104 views)  

Dear Mr Tan,
First of all, thank you for providing us commoners the opportunity to ask financial questions and to get reliable advice from you.
 
I am a foreign student studying in Australia.  I receive my university grant in AUD, of which I would have some left over each month, and I had also transferred some additional money over to Australia to earn interest here due to its higher rate (4.6% now).  The AUD had fallen some 10% over the past year from 1.3x to the SGD down to 1.15 to the SGD and there is a niggling fear that it could fall further as situations in China worsen and Australians losing jobs due to major companies shutting down.  Alternatively, it could strengthen due to the global economy recovering and Australia exporting to countries other than China. 
 
You have previously posted that one option is to keep the money in the bank and wait for the AUD to recover.  I do not need this money now, but I am concerned that I may have to wait 5 - 10 years for the AUD to recover back to 1.3x to SGD.  Should I cut my losses and convert it back to SGD in these next few days, while the exchange rate is relatively good recently?  Alternatively, should I invest in REITs, shares or bonds here and wait the 5 - 10 years for the AUD to recover?    
 
REPLY
It is difficult to guess where any foreign currency is heading. I would not be able to advise you on what you should do.
 
But, if I were in your position, my approach would be as follows:

1. The measurement should be based on the AUD value today, i.e. would I be better off by converting the AUD to SGD at 1.14 or to keep it in AUD?
 
2. As I am studying in Australia, there is a need for me to keep the savings in AUD as I need to spend it, so keeping in AUD make more sense, unless I have strong reason to avoid the AUD
 
3. The AUD pays a higher interest rate than SGD and has depreciated by 10% over the past year, so the chance of further depreciation is likely to be lower.
 
4. If I have to decide, I will keep my saving in AUD. It should keep its value against SGD or other currencies, as it has depreciated in recent years. 
 
Tan Kin Lian


Keeping savings in Australian dollars - is it a wise move?
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Dear Mr Tan,
First of all, thank you for providing us commoners the opportunity to ask financial questions and to get reliable advice from you.
 
I am a foreign student studying in Australia.  I receive my university grant in AUD, of which I would have some left over each month, and I had also transferred some additional money over to Australia to earn interest here due to its higher rate (4.6% now).  The AUD had fallen some 10% over the past year from 1.3x to the SGD down to 1.15 to the SGD and there is a niggling fear that it could fall further as situations in China worsen and Australians losing jobs due to major companies shutting down.  Alternatively, it could strengthen due to the global economy recovering and Australia exporting to countries other than China. 
 
You have previously posted that one option is to keep the money in the bank and wait for the AUD to recover.  I do not need this money now, but I am concerned that I may have to wait 5 - 10 years for the AUD to recover back to 1.3x to SGD.  Should I cut my losses and convert it back to SGD in these next few days, while the exchange rate is relatively good recently?  Alternatively, should I invest in REITs, shares or bonds here and wait the 5 - 10 years for the AUD to recover?    
 
REPLY
It is difficult to guess where any foreign currency is heading. I would not be able to advise you on what you should do.
 
But, if I were in your position, my approach would be as follows:

1. The measurement should be based on the AUD value today, i.e. would I be better off by converting the AUD to SGD at 1.14 or to keep it in AUD?
 
2. As I am studying in Australia, there is a need for me to keep the savings in AUD as I need to spend it, so keeping in AUD make more sense, unless I have strong reason to avoid the AUD
 
3. The AUD pays a higher interest rate than SGD and has depreciated by 10% over the past year, so the chance of further depreciation is likely to be lower.
 
4. If I have to decide, I will keep my saving in AUD. It should keep its value against SGD or other currencies, as it has depreciated in recent years. 
 
Tan Kin Lian