SINGAPORE: Singapore’s dollar surged to its highest level in nearly a decade, driven by traders responding to the Monetary Authority of Singapore’s (MAS) relatively hawkish policy stance compared to the Federal Reserve’s dovish outlook.
The local currency reached levels against the US dollar that had not been seen since 2014 late last Friday and fluctuated around the 1.30 per dollar mark during early trading on Monday.
So far in 2024, the Singapore dollar has appreciated by approximately 1.5%, making it the second-best performing currency in Asia, trailing only Malaysia’s ringgit.
The MAS, which primarily uses the exchange rate as its monetary policy tool, opted to maintain an appreciating bias for the local currency at its July meeting. This decision was part of the authority’s strategy to contain inflationary pressures in the city-state.
Further boosting the Singapore dollar was an upgrade to the country’s economic growth forecast last month. The government raised its projection for 2024 GDP growth to a range of 2% to 3%, up from the previous forecast of 1% to 3%. This revision was based on a more optimistic outlook for external demand, reinforcing confidence in the local currency.
In contrast, the US dollar has been under pressure after Federal Reserve Chairman Jerome Powell signaled that interest rate cuts are likely in the near future. With US rates expected to decline as soon as next month, the greenback has weakened against other major currencies.
As the Singapore dollar continues to benefit from resilient economic fundamentals and the MAS’s policy stance, analysts anticipate that it could maintain its strength in the coming months, particularly if external demand remains robust and inflationary pressures persist.
Meanwhile, global markets will be closely watching the Federal Reserve’s next moves, which could further influence the US dollar’s trajectory against its Asian counterparts.
TISG/