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S’pore overtakes Japan as Asia’s biggest forex hub

SINGAPORE — The Republic has overtaken Japan as Asia’s biggest foreign-exchange centre for the first time as trading surged in the past three years, the Monetary Authority of Singapore said yesterday, citing a survey by the Bank for International Settlements.

Singapore’s average daily foreign-exchange volume increased 44 per cent to US$383 billion (S$490.4 billion) as of April from US$266 billion in the same month in 2010, the MAS said. The average interest-rate derivatives volume climbed 6 per cent to US$37 billion over the same period, the highest in the region after Japan, it said.

“Singapore has definitely established itself as a hub for foreign-exchange trading. Part of this emergence is due to the increasing importance of Asian currencies, and Singapore’s time zone is well-suited for that,” said Mr Khoon Goh, a senior currency strategist at ANZ Bank in Singapore.

The rise in ranking puts Singapore behind just the United Kingdom and United States in the US$6.67 trillion global currencies trading market, according to the Bank for International Settlements (BIS).

Singapore’s foreign-exchange market expanded as the Government offered incentives to boost its financial markets, which also led to a surge in the nation’s fund management industry, where more than 500 asset managers oversee about US$1.1 trillion.

“Our growing strength in foreign exchange is a key complement to the development of capital market and asset management activities,” said Ms Jacqueline Loh, Deputy Managing Director at the Monetary Authority of Singapore.

“It will also better position our financial centre to serve the investment and risk management needs of financial institutions and corporates throughout Asia.”

Currencies trading in Singapore is still one-seventh the size of the UK and less than a third of the US. The UK has 41 per cent of the global market, followed by the US with 19 per cent, according to the BIS, the record-keeper of the world’s central banks. Singapore has a 5.7 per cent share, followed by Japan’s 5.6 per cent and Hong Kong’s 4.1 per cent, it said.
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http://www.todayonline.com/business/spor...-forex-hub

September 3, 2013
Singapore

A few months ago, the Monetary Authority of Singapore (MAS), the country’s central bank, released its annual report for the fiscal year ending 31 March 2013.

And the results were ‘shocking’, at least for those of us who read central bank annual reports cover to cover like a Harry Potter novel.

The bottom line for MAS showed a mind-boggling S$10.2 BILLION loss (roughly $8 billion USD), about as much as General Motors lost in its worst year.

This is the antithesis of what one would expect from Asia’s dominant financial center. And it begs the question– how can a central bank, which has the power to conjure money out of thin air, even suffer a loss, let alone such a heavy one?

Simple. MAS was desperately trying to hold back the Singapore dollar’s rise against the US dollar.

Because Singapore is a trade-based economy and the US dollar is so central in international trade as the world’s reserve currency, MAS has been trying to keep the Singapore dollar somewhat restrained vs. the US dollar.

Essentially MAS was buying US dollars and then intentionally selling them at a lower price in order to create artificial demand for US dollars.

This was a completely failed strategy.

Singapore’s ultra-healthy economy attracts investment from around the world, and the natural tendency is for the Singapore dollar to rise.

This rise has been even more pronounced given Ben Bernanke’s journey into monetary madness over the last several years.

Since 2008, the Singapore dollar steadily appreciated by more than 20% from peak to trough as investors sought a more stable currency alternative. After all, Singapore is a very strong, growing economy with zero net debt.

Because of these factors, MAS lost a prodigious sum trying to prevent its currency’s natural rise; the S$10.2 billion they lost constitutes roughly 3% of GDP.

In fact, Singapore’s economy only grew by S$11.5 billion from 2012-2013… so MAS managed to blow through 87% of the country’s economic growth last year fighting Ben Bernanke. Crazy.

This is something that is clearly not sustainable. And while that term is a bit overused today, such losses cannot continue indefinitely.

A central bank CAN go bankrupt, often creating a major currency crisis. And this is what suggests to me, above all else, that the fiat system is on the way out.

Fiat currency has been the greatest monetary experiment in the history of the world. Four men control over 70% of the world’s money supply, giving them control over the price of… everything.

And this system is so absurd that, healthy nations like Singapore are forced to lose billions in order to keep playing the game.

That’s exactly what it is– a game. Like most nations, Singapore has been playing this game for decades while the US changes the rules whenever it sees fit.

And it’s becoming obvious that the cost of playing is now far exceeding the benefit it receives. The hard numbers are very clear on this point.

This spells one inexorable conclusion: game over.

More specifically, this means a dramatic decline in the US dollar’s role as the global reserve currency in the next few years.

And this has far-reaching implications. More on that in a few days.

Source: http://www.sovereignman.com/trends/singa...nke-12665/

(06-09-2013, 12:12 PM)DP28 Wrote: [ -> ]Source: http://www.sovereignman.com/trends/singa...nke-12665/

interesting website - thks for the link

When a company does a share buyback, we know they have to spend money; but when they issue shares at a discount to market, do they "lose money"??

Similarly, does central banks lose money by issuing currencies? For sure the population has to pay for it via higher inflation, or shareholders of companies pay with diluted holdings.

People often assume buying and selling are symmtrical, when they are not. It is much easier to make a currency or stock devalue than appreciate. Once we understand that we will understand if central banks can be "bankrupt".

The rise and fall of a currency must be controlled so that the businesses have times to respond by sourcing for cheaper materials, hedge the currency, move some of the operations overseas, increase or reduce the price of products etc.

Quote:A central bank CAN go bankrupt, often creating a major currency crisis. And this is what suggests to me, above all else, that the fiat system is on the way out.

Central bank can run out of foreign reserve to control its currency but it is free to print as much as it wants. But, whether other countries want it a not is another thing.

I am not sure why there is so much against fiat system. It is the only system that is able to work currently barring barter trades.
And, it works well. The US currency depreciates when it goes into printing mode.

Countries can choose to ignore and let their currencies rise but they also can intervene to reduce the impact. However, no matter what the central bank does, it is still the economy of the country that determines the strength of the currency in the longer term.

(06-09-2013, 03:42 PM)yeokiwi Wrote: [ -> ]I am not sure why there is so much against fiat system. It is the only system that is able to work currently barring barter trades.
And, it works well. The US currency depreciates when it goes into printing mode.

well - the current set of "rules" for the monetary system is only 70yrs old if you consider that Bretton Woods was in 1940s. Of course money has existed in many forms mostly in gold for centuries. Some of the forumers might even be older than Bretton Woods!

Fiat should never go away since no sovereign will want to forego their control over monetary flexibility - history has shown that most governments will resort to some sort of money printing in some form of another once they get into debt problems as a result of fiscal irresponsibility. "This Time Is Different: Eight Centuries of Financial Folly" is a good book to read if one has the patience to read through it (warning thick book!!)

http://www.amazon.com/This-Time-Differen...0691152640

The only question is whether the current system of the USD as the global reserve/settlement ccy comes under challenge, which players are involved and when it happens.