For this year, Australian dollar (A$) stayed below S$1.30 for most part of year since April. This was because Australia was impacted by poor economic performance of China and global economy. Australian dollar did better in 2011.
This is not the only bad news. Reserve Bank of Australia (RBA) cut its benchmark cash rate by 1.25% to low 3.0% in 2012. As for 2011, cash rate was 4.75% for most part of year until 2 November 2011, when RBA started to cut cash rate.
My currency linked investment (CLI) pairing A$ with S$ performed worse than last year because of double whammy i.e. low currency rates and low interest rates. The realised profit for 2012 was 1.3% annualised. As for 2011, it was 1.6% per annum.
Even at 1.3% return, I am contented. It can be worse if Australian dollar remains depressed below my original S$ investment amount and I am still holding onto the A$ deposit. Even interest rate earned on A$ deposit cannot cover depreciation in value of A$.
Copyright © 2012, limkimtong for Living Investment
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