28 Feb '13, 12pm
Why should individuals invest in foreign currency?
I had the chance to visit Bangkok in Thailand during the Asian Financial Crisis in 1998. The exchange rate between the Singapore Dollar and the Thai Baht moved from a stable pre-crisis rate of around 1 Singapore Dollar to 16 Baht to crisis rate of 24 Baht. Against the Singapore Dollar, the Thai individuals experienced a loss of purchasing power by 50%. It meant also destruction of the real value of cash assets. What happened when I moved around in the city? Thai businesses I encountered asked me to make my payments in Singapore Dollar. The Singapore Dollar (an investment in a foreign currency to Thais) was a lot sexier to hold on to in a crisis.