Amid a global economic downturn, the Singapore dollar appears to be holding up relatively well, with Bloomberg saying that it has “established itself as Asia’s most resilient currency against the US dollar this year” in a Sept 19 article.
Nearly every other major currency in the region has retreated against the US dollar.
It added that more good news may be in store, as it may gain even more strength if the Monetary Authority of Singapore (MAS) tighten its exchange-rate policy again in October in an endeavour to curb core inflation, which reached a 14-year peak in July.
Earlier this month, Bloomberg reported that the SGD is “emerging as the top bet for Wall Street’s biggest banks,” including Goldman Sachs Group Inc.
Goldman strategist Danny Suwanapruti called it “our favorite currency in Asia outside of Japan.”
However, the Sing dollar is still down by over 4 per cent against the US dollar this year, despite doing better than its counterparts in Asia.
According to MUFG Bank, the Sing dollar may yet gain over one per cent against the US dollar over the coming months, with Bloomberg quoting MUFG currency strategist Jeff Ng as saying, “Our call of a SGD rebound is premised on most of the Fed’s eventual rate hikes already being priced into markets now.”
The bank forecasts that by the end of 2022, the SGD will rise to 1.38 against the dollar, up from its current rate of 1.4070.
However, industry experts warned that even if MAS carries out another round of policy tightening—it’s the fourth for 2022—there is still no guarantee of its recovery.
Bloomberg quotes the head of Asean and South-Asia FX research at Standard Chartered Bank SG Ltd. in Singapore, Divya Devesh, as saying, “Despite the MAS tightening, USD/SGD has continued to inch higher amidst a broad USD rally supported by a hawkish Fed, geopolitical tensions and a slowdown in China’s growth.”
Should MAS refrain from further tightening, Mr Devesh says he expects that the Sing dollar would fall to 1.42 per US dollar. /TISG