Answer 1: Let us assume that there is a firm ABC based in Singapore and which want to expand it's operations. For this it takes a loan of INR 100000 at 3% interest rates for an year. Now at the current spot rate ABC Ltd will convert this into Singapore dollar.

Which will be = 1000000 / 54.0410 = SGD1850.

Now if we talk from International Fisher Effect point of view. IFE states that the exchange rate of two countries can be predicted by the differences in their nominal interest rates. Therefore countries with higher nominal interest rates will experience a higher rate of inflation and which will result in currency depreciation against other countries.

Hence Singapore which has a higher rate of nominal interest rates will experience a decline in it's currency vis a vis other currencies.

The strategy that is used by these Singapore firms will be not effective at all. Instead these firms which are anticipating a rise in the SGD will see a depreciation against the INR. Also they will be worse off and won't even manage to cover the interest expenses on the borrowed amount.

Answer 2: As we can see that the country which has a higher rate of nominal interest will see rise in inflation. The rise in inflation will directly affect the value of that currency. The effect will be a negative effect and the currency will loose value or depreciate against the rest of the currencies. Now since the value of the currency has declined therefore the purchasing power to the currency will also fall, having effect of an increase in prices of goods and services.

Therefore since the SGD will depreciate against the INR the purchasing power of INR will be more stronger than SGD and Indians can purchase more Singapore goods. On the other hand SGD will buy less goods of India.