Saturday, July 25, 2009

Currency Forex

Listening to complains of the poor exchange rates from Singapore currency to Malaysia Ringgit at Bukit Panjang Plaza, I decided to calculate the profit margin of a dealer.

At Ang Mo Kio, SGD to Ringgit was 2.44/0.40 a couple of weeks ago. It means 1 SGD = 2.44 Ringgit. (Although it is now roughly 2.47 Ringgit) The profit a dealer makes is 2.44 * 0.4 = 0.976

Therefore, the dealer will probably make (1-0.976) = 0.024 for every dollar exchange back and forth. Of course, there is a holding cost and currency risks as prices fluctuate. However, I will be interested to know the rates at Bukit Panjang and whether there is a arbitrage opportunity. (although i doubt)

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