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Sunday, March 23, 2008

Does currency hike curb higher oil price?

Oil price for NYMEX is future price that why is at least one month advance contract.
Nov. Oil price is USD$ 90/barrel
Mar. Oil price is USD$105/barrel


Base on the currency Chart for one SG Dollar that exchange in US Dollar.
We get the Oct. exchange rate at 0.68 for buying Nov. Oil contract at NYMEX.
and get Feb. exchange rate at 0.705 for buying Mar. Oil contract at NYMEX.
Working on Nov. Oil :-
Using SG Dollar to buy Nov. Oil, therefore 1/US$0.68 = SG$1.47058

SG$1.47058 X US$90/Barrel = SG$132.35220
Working on Mar. Oil :-
Using SG Dollar to buy Mar. Oil, therefore 1/US$0.705=SG$1.41843

SG$1.41843 X US$105/Barrel = SG$148.93515
The difference is 148.93515 - 132.35220 = 16.58295
that is for 11.1% increase currency hike for SG Dollar to buy the oil at NYMEX.
If let's say SG Currency fixed at Oct. exchange rate to buy Mar. Oil at NYMEX.
(Mean that SG Dollar don't get any hike)
Working:-
SG$1.47058 X US$105/Barrel = SG$154.41090
The difference is 154.41090 - 132.35220 = 22.05870
This is very expensive to fixed the currency for buying the growing high oil price.
This is the Pro for currency hike to curbing higher oil price but is bad for exporting goods to other trading country, because high SG Dollar other country people will have to pay more to buy SG Goods.
I believe that oil price will goes down in the middle term this is due to most country adjust their economy growth to lower and the winter in cold country is goes to ended soon.

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The information and analysis provided here does not constitute investment advice and the blog owner shall not be liable for any monetary losses or other material losses incurred as a result of using information from this blog.