Spread Betting: Trading SGD/JPY
Included in the minor currency pairs traded on the Forex is the Singapore dollar versus the Japanese yen. It is interesting to draw similarities between these two economies, as well as to note the differences.
Perhaps Singapore is the more up-and-coming economy, based on how quickly it has developed its position in the world. It was not so long ago that it was linked with Malaysia, yet with a lack of physical resources and a small domestic market, Singapore actively sought overseas partners and has developed a remarkable export oriented economy. It focuses on consumer electronics and technology, pharmaceuticals, and medical technology, and is becoming known as a financial hub for Southeast Asia.
Singapore is strategically located on major sea lanes, which has assisted its endeavours to become recognized as a notable economy. Its growth was strong for several decades, but slowed down during times when the world economy has staggered, because of its dependency on exports. However, the workforce is skilled and the modern factories are well-equipped to produce advanced products. Electronics is the largest sector of production, and financial services are also expanding.
For its part, Japan suffered a serious setback in March 2011 with the tsunami and the nuclear power plant disaster, and it has taken a while to get back to profitable production. However, Japan has developed its industrial production to a high level, and Japanese products are used and admired the world over. Japan is particularly noted for its automobile industry and its electronics.
As a small island, Japan has few natural resources and relies on imports. This is one reason that there has been so much focus on nuclear power generation, which stood at 25% of electrical production but was aimed to expand to 50%. The economy is good, subject only to world conditions impacting exports.
If you want to spread bet on the Singapore dollar versus the Japanese yen, it is a good idea to study the charts for the last few months and learn how it moves. At the time of writing, the price is moving sideways, trading in a range, and thus suitable for a trading plan which can take rapid small profits. This currency pair is not particularly volatile, but even so you need to take care to protect your profits by establishing stop loss positions for every bet that you place.
As both economies depend on exports, the lifeblood of small countries, you can expect the currencies to go up and down together with many of the world trade events. This means that the currency pair will not be impacted as greatly as, for example, a pairing between dissimilar economies, such as a resource rich country like Canada and one of these two. Both countries are actively engaged in growth and expanding their business in the world, and you need to use technical analysis to determine the market sentiment with regard to the currencies, to anticipate in what direction they are going to move.
Spread Betting on SGD/JPY
The current price for the Singapore dollar versus the Japanese yen on a rolling daily spreadbet is 6160.7 – 6168.7. Because of the way that Forex numbers are written using “pips” (percentage in point), you would normally move the decimal point four places to the left to see the actual conversion rate. However, with Japanese yen there are so many of them compared with other currency units that they use the special convention of only moving the decimal point two places. So what this currency rate means is that one Singapore dollar is equal to 61.6 Japanese yen, approximately.
If you think that the Singapore dollar is going to increase in value compared the yen, then you can bet on this by placing a long bet on this currency pair. As the Singapore dollar is first in the pair, a long bet means you think it is going up, and a short bet means you think it is going down, or that the yen is going up. Say you placed a long or buy bet of £1.50 per point, which would go on at 6168.7, the buying price.
After a few days, you might see that the price has risen to 6415.1 – 6423.1, and decide to close your bet and take your profit. Working out how much you won, you note that you placed the bet at 6168.7, and it closed at 6415.1, the selling price. That means that you gained 6415.1 less 6168.7 points, which comes out to 246.4 points. With a bet of £1.50 per point, you have made £369.60.
What if it goes the wrong way? You should have already worked out how far you can let it go before you have to close the bet to protect your capital. Say the price drops to 6123.2 – 6131.2, and this is the level that you must close the bet to minimize your losses. In this case you lost 6168.7-6123.2 points, which is 45.5. With your stake, that works out to a cost of £68.25.
It is just as straightforward if you decide that you think the Japanese yen is going up compared to the Singapore dollar. You just have to remember that this is a short bet, given the order of this currency pair. Perhaps you would stake £2.50 per point on this bet.
If you are correct, you might close this bet when the price has fallen to 5941.0 – 5949.0. To work out how much you won, first you know that a short bet is placed at the lower number of the original quote, 6160.7, and closes at a higher number which in this case is 5949.0. That works out to 211.7 points. For your stake of £2.50 per point, you made a profit of £529.25.
Once again, you might find that after you placed your bet the price goes the wrong way, and you are forced to close your bet quickly to cut your losses. Say the quote went up to 6183.0 – 6191.0 and you closed your bet. This time you have lost 6191.0-6160.7, which is 30.3 points. That cost you £75.75.
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