07-01-2013, 10:09 AM
(07-01-2013, 01:34 AM)natnavi Wrote: I have always thought that the US interest rate is related to SG interest rate via the following means:
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E.g.
US interest rates = 0.5%
SG banks borrows money from the US at 0.5% interest.
SG banks lends borrowed money to SG consumers at 0.7%
Therefore, netting a 0.2% profit for SG bank.
This is assuming that the USD/SGD rates remain constant.
If the SGD strengthens at 0.1%, the SG bank can either 1) net profit 0.3% or 2) reduce their lending fee from 0.7% to 0.6% (attracts more customers) and still net a 0.2% profit for SG bank.
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The above example is something that has been happening for the past couple of years now, and I believe it is one of the reasons why the property market has been growing red hot.
Not an expert on the issue, but i am skeptical on the view.
The understanding is interest rate is determined internally, with consideration of various factors which include exchange rates and others countries interest rates. There should not be a direct link but will have strong correlation since we live in a global village :D
Correct me if i am wrong
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