Currency Exchange Rates

How much should you be earning if you move to the US, UK or UAE to maintain the same standard of living that you have in India? I have a basic thumb rule called 4-3-2 that I use for a quick calculation... and here's explaining it. It's a well established fact that someone earning USD 100k in the US is not living a lifestyle similar to someone earning Rs 85 Lakhs in India. The Indian guy would have a much better lifestyle with that money in India because cost of living is substantially lower. Thus, to equate both currencies across geographies from a cost of living perspective, instead of using the foreign exchange rate for conversion, we use the PPP factor or the Purchasing Power Parity. 👉🏼 For USA, the PPP factor with respect to INR is ~22. This means USD 100k = INR 22L in purchasing power, and not INR 85L 👉🏼 For UK, the PPP factor w.r.t INR is ~35. This means GBP 100k = INR 35L in purchasing power, and not INR 1 crore 👉🏼 For UAE, the PPP value of AED 100k = INR 10L and not INR 23L 👉🏼 So, to get purchasing power equivalent for India, divide your INR forex rate based US salary by 4, UK salary by 3, and UAE salary by 2. 👉🏼 All these countries have different tax rates, so please only compare post tax incomes. Also know that such PPP indices are built based on the costs for an entire country. Thus, when you take cost of living of specific cities into account, there would be differences... but it's a general benchmark for the entire economy. A hammer used to flatten pizza dough may give you the desired result, but may not always be advisable. So, remember this does not take into account the value you ascribe to living close to family, air quality, absolute savings, etc... so use that in your own context. Your life's priorities are not everyone else's priorities. #casarthakahuja #ppp #economics #usa #uk #india #uae

In finance, the counterintuitive truth is cheaper product == better product Since April we've adjusted fees across most of the routes on Wise, which led to much lower fees for larger transfers on major routes. Some other fees went up as well. Read on about how and why? We started Wise to make the best tool for moving and managing the world's money. Part of this mission is to make it cheaper and cheaper for you to use as we optimise away the costs and pass on these savings. On the other hand we always balance to be profitable, to be independent and reliable for you. How did we go about changing fees? Overall, we were able to lower the average fees by ~5%, because more and more people use Wise and the infrastructure investments are paying off, making it cheaper for us to serve your money. So, we made it cheaper for you to use Wise. But some changes were way bigger than the average. 😮 💥 Sending £5k to Europe costs 21% less now! 💥 Fees from Singapore to Australia are S$1.37 + 0.25%. That's 41% less for a S$10k transfer than it was in March. 💥 Earning in Switzerland and spending in Europe is now half the fees what it used to cost. These are just some examples. This clever calculator shows how your route has changed: https://lnkd.in/gZNZsZ5m It was a lot of good news for those moving bigger amounts on major routes, but some other destinations got more expensive, like transfers to Mexico and Vietnam. Local payouts from your Wise Account have higher fees, e.g in Australia (A$1.23) and the US ($1.13). Local payments in the UK, Eurozone, Singapore and Hungary remain free. Read more here https://lnkd.in/gTue6tqj

Market watchers know how the dollar has decoupled from Treasury yields. But what does it mean for emerging markets? The first part - a weaker dollar - is an obvious EM positive. It typically eases dollar debt servicing, helps trade, supports capital flows, boosts investor returns …although not all EMs are helped equally, nor is rapid dollar depreciation in anyone’s interest. Caveat emptor Suddenly, the macro set up looks good for many #emergingmarkets = weaker dollar + better relative growth prospects + low energy and food inflation + policy stimulus in Europe and China A new problem for EM maybe rising DM bond yields. So how should investors weigh up a higher US term premium versus all the other good stuff? 1️⃣ recent history shows a few phases where the dollar is weakening, term premium are elevated, and EMs are still outperforming. For example = late 2003-2004 , or 2006-early 2008 2️⃣ EM performance drags from higher US yields are principally about tighter financial conditions. But many EMs have transformed their macro structures since the “fragile 5” phase a decade ago. EM economies have macro de-risked 3️⃣ EMs are oxygenated by a weaker dollar. And faltering confidence in American exceptionalism boosts investor interest now. Plus that shift away from dollar credit to local FX funding, minimises the headwind from TSY bear steepening 4️⃣ another important theme is how some EM and Frontier markets have become less “global”, and more “local”. For example, some EMs are taking advantage of the new policy space of a weaker dollar to cut rates - Indonesia, Mexico, Poland …or Egypt , just last week ➡️ and more idiosyncratic behaviour in EMs could be something of a “silver lining” for investors …particularly useful in the new, supply-shocked macro and investment regime #economy #investing #markets

[The USD Is Falling—Should You Hedge Your Investments?] 1. If you’ve been investing in U.S. assets or USD-denominated investments this year, you’ve probably felt the pinch. 2. The U.S. dollar has depreciated nearly 8% against the euro and Japanese yen, and even against the Singapore dollar, it’s down about 5% year-to-date. 3. So if you’re a Singaporean who earns and spends in SGD but invests in USD assets, your 5% gain in the U.S. market this year may have been completely wiped out by currency losses. 4. During times like these, many investors start thinking about hedging their currency exposure. Here are four ways to hedge against a weakening USD: 5. Short the USD/SGD Pair - This is the most direct hedge. It requires a forex trading account and a solid understanding of forex mechanics. However, it comes with margin requirements, interest costs, and the risk of liquidation. This strategy is not passive and requires active management. 6. Buy the Invesco DB US Dollar Index Bearish Fund (UDN) - This ETF shorts the USD against a basket of six currencies (excluding SGD), so it’s not a perfect hedge for Singapore-based investors. It’s easy to buy on the stock exchange but comes with an annual expense ratio of 0.78%. Also, long-term performance has been weak. 7. Buy Gold - When the USD weakens, gold prices often rise — as it takes more dollars to buy the same amount of gold. However, gold isn’t a precise USD hedge as its price is influenced by central bank demand, jewelry consumption, and geopolitical factors. 8. Invest in SGD-Hedged Unit Trusts - Some unit trusts offer SGD-hedged share classes to reduce currency risk. It’s a convenient option for long-term investors, but not all funds offer it, and the hedging cost may slightly reduce returns over time. 9. Hedging isn’t as simple as betting against the USD. It involves costs, risks, and timing — and if done incorrectly, the hedge may become a liability rather than protection. 10. For most investors, it may be better to accept some currency volatility as part of international investing and focus on long-term strategy instead of reacting to short-term forex movements. For more insights like this, join our Telegram channel: https://t.me/realDrWealth

Foreign Central Bank moves begin to increase interest rate differentials With this week's quarter point cuts by the Bank of Canada and the European Central Bank, the policy interest rate differentials with the dollar have begun to widen. The Federal Reserve's 5.5% upper bound target is now 75 basis points above the Canadian policy target, and it is now 125 basis points higher than the ECB's target. It is probably too early to know how this will affect market rate differentials. The increase in interest rate differentials in favor of the dollar could lead to a strengthening of the dollar against these foreign currencies. So far, there have been no big movements, likely because the changes were widely anticipated and so are already priced into market currency values. Exchange rates depend on many developments that affect supplies and demands for currencies, but relative interest rates are the most important during non-crisis periods. Investors and companies with large cash balances will tend to move those funds toward currencies that have relatively higher rates today or that are expected to appreciate in value in the near future. What will be interesting to see is whether there are larger exchange rate movements if foreign central banks continue to be ahead of the Fed in monetary policy easing, as seems likely. A strong dollar creates winners and losers. For US manufacturers a stronger dollar would cause an additional competitiveness challenge in export markets. At the same time, a strong currency increases the purchasing power of US consumers and reduces costs for the many companies who source inputs abroad. Because it would reduce import prices, at least marginally, a stronger dollar would help the Fed's fight against inflation. Essentially, foreign countries would experience the mirror image of these effects.

Saw a goldbug post something on X about Canada not having gold and I got a little triggered so here is a history post. When I started at the Bank of Canada in 1994, I was asked to do a project examining the optimal currency distribution of Canada's reserves. Based on historic currency returns and risk correlations, gold was the least appealing asset. Somewhat a no brainer because it pays no interest. Canada had already been in the process of selling its gold when I wrote my paper, but it might have been the final nail. I was on the Banks's reserve desk when the last bar was sold in 2002. Here's the thing. Back then, central banks still had people believing in that FIAT was sound money. There was no QE, except some weird thing Japan was trying out (was supposed to be temporary) . Here's the real trick though. On a net asset basis, Canada's foreign reserves were very small. Something like $13 billion. In 1998, it burned through $6 billion or so in a few weeks during the LCTM/Russia default debacle. Eventually the Bank of Canada had to stop the currency intervention and just raise interest rates, which it did by 100 bp which shocked the market but CAD still kept weakening. The issue was the market didn't respect the Bank of Canada's intervention because $13 billion was considered too small. After the dust subsided, Canada looked to increase the size of its reserves, the trick was it was going to do it by borrowing. That is why in the early 2000's you start seeing Canada doing USD globals, and being a lot more active in USD/CAD interest rate swaps, the dealer hedging those swaps caused shortages and squeezes in various Government of Canada on the runs and especially off the run bonds. Anyway, the size of the reserves grew significantly, but its a paper tiger. The Bank of Canada hasn't intervened in USD/CAD since 1998, not because the market is now scared of it. The currency has been left to its own devices. Seriously, USD/CAD went to 1.6140 in January 2002 and management would not endorse intervention. I know. I was the head FX trader there at the time. Any sustained intervention now would be problematic because of the asset liability nature of the reserve account. To sell USD assets for CAD puts your liability side out of balance. Think of Canada's reserve account as a large hedge fund that is return constrained because it has to have each bucket duration matched, and further, all assets have to fairly liquid. Gold doesn't have a have any place on a ALM balanced reserve fund, you'd have to lease it from other central banks. So why isn't the Bank of Japan intervening in yen? I wonder if if they have constraints of some sort like the Bank of Canada does, and despite huge reserves, can't actually sustain a prolonged fight.

Deciphering the Stability and Quality of India's Foreign Exchange Reserves: A Deep Dive In our latest analysis, we delve into the intricate dynamics of India's foreign exchange reserves, unraveling the layers that signify their quality and stability. As global economic landscapes evolve, understanding the robustness of these reserves becomes paramount for predicting and safeguarding India's financial future. We explore various components that constitute the foreign exchange reserves, such as the balance of payment sheets and foreign currency assets. By dissecting the interplay between current and capital accounts, we aim to provide insights that demystify complex economic indicators, offering clarity on India's economic resilience against global uncertainties. Join us in this enlightening journey as we decode the metrics that gauge the health of India's economic backbone. Whether you're an economics aficionado or a professional looking to grasp the nuances of economic stability, this analysis serves as a critical resource in navigating the complexities of financial economies. #ForeignExchangeReserves #EconomicAnalysis #IndiaEconomy #BalanceOfPayment #FinancialLiteracy #EconomicInsights #FinancialStability #EconomicResilience #DataDrivenDecisions #GlobalEconomics

ARMA(1,1) VOLATILITY FORECASTING 📊 Volatility forecasting based on martingale models that assumes all variance shocks are permanent. The ARMA(1,1) framework combines autoregressive persistence with moving average shock reversal, capturing the true mean-reverting nature of idiosyncratic variance that martingale models fundamentally miss. The fundamental paradigm shift: Martingale: "Yesterday's volatility spike becomes today's new normal" ARMA(1,1): "Large shocks decay with half-life of 1.6 months, 90% dissipation within 5 months" This sophisticated approach delivers three transformative advantages for risk management: 📈 Mean Reversion Modeling ⚡ Superior Forecast Accuracy 🎯 Theoretical Foundation An empirical application to Microsoft reveals striking insights. The autoregressive parameter of 0.656 indicates moderate persistence, the negative moving average coefficient actively dampens shock propagation. During periods of elevated volatility, the ARMA(1,1) model anticipated mean reversion while martingale forecasts remained stubbornly elevated. Real-world applications transforming risk management: - Value-at-Risk calculations that adapt to volatility clustering - Option pricing models with realistic variance dynamics - Portfolio optimization incorporating temporary versus permanent risk - Systematic strategies exploiting volatility mean reversion - Regulatory capital calculations reflecting true risk evolution How does your organization model volatility persistence? Are you still assuming all variance shocks are permanent? 🤔 #VolatilityForecasting #RiskManagement #QuantitativeFinance #ARMA #MarketMicrostructure #FinancialEconometrics #SystematicTrading #DerivativesPricing #PortfolioManagement #TimeSeries

The Myanmar currency, the kyat, has appeared relatively stable in recent months. However, the key question remains: Has the Central Bank of Myanmar (CBM) genuinely succeeded in stabilizing the kyat’s value? I remain deeply skeptical. The CBM continues to lack the essential tools, market infrastructure, and institutional independence required to conduct effective monetary policy. An examination of the annualized standard deviation of the kyat — a common statistical measure of exchange rate volatility — provides revealing insights. During the USDP administration, the standard deviation stood at 7.02%; under the NLD government, it rose slightly to 8.27%. However, under the SAC from February 1, 2021, to May 22, 2025, volatility surged dramatically to 23.33%. This sharp increase signals a period of acute exchange rate instability. The pronounced fluctuations during the SAC period were driven primarily by domestic policy decisions, rather than by external shocks or global economic conditions. This serves as a textbook illustration of the dangers of irrational or inconsistent economic policymaking. In line with fundamental macroeconomic theory, such policy missteps have undermined investor confidence, destabilized inflation expectations, and fueled exchange rate volatility — all of which contribute to broader macroeconomic instability. In short, the apparent recent stability of the kyat may be more superficial than structural. Without credible institutions and sound policy frameworks, true exchange rate stability remains elusive.