SINGAPORE: The Singapore dollar recently has not only reached a decade-long high against the US dollar, but is also observing highs against the Indonesian rupiah and the Japanese yen.
On Aug 23, the currency traded around 1.30 against the US dollar. In comparison, it was at 1.337 at the beginning of the month and had been at 1.358 in early July.
The strong dollar has meant a boon to Singaporean travelers and other sectors such as logistics and transportation companies, banks, and insurers are reacting positively to the high Singdollar, reported Bloomberg on Thursday (Sept 5).
However, should there be a drop in the number of tourists to Singapore, this is sure to affect the hotels and restaurants sector, who were the most apt to react negatively to the strength of the Singdollar, a recent survey of 796 local companies carried out by the Singapore Business Federation (SBF) showed.
Singapore’s monetary policy of using the exchange rate is largely responsible for the currency’s strength, and Bloomberg explained the other factors that have also come into play, such as China’s economic troubles and trade tensions between the United States and China.
It quoted the chief executive office of SBF, Kok Ping Soon, as saying, “The strength of the Singapore dollar is a balancing act.”
He explained that while it could keep inflation from rising, a too-strong Singdollar could also “price us out of exports.”
Singaporean travelers, however, are taking advantage with more overseas trips, especially to places where their dollars can go further, which include Bali and Bangkok.
However, Rob Carnell, chief economist for Asia-Pacific at ING Groep, told Bloomberg that at present, Singapore’s economy is not a booming one, but one that is “pottering along.”
He also warned that the strength of the Singdollar could be an issue due to weak exports affecting manufacturing and employment.
Industry experts have been saying, however, that the Singdollar’s high may against the greenback be checked in the coming months.
An Aug 30 CNA report said that the US dollar may regain strength if the country is able to avoid going into a recession.
Bloomberg reported in July that the odds are looking good for the Singapore dollar to outperform other Asian currencies for the third consecutive year.
The Singapore dollar is one of the most-traded currencies in Asia and around the world, representing around 2 per cent of daily forex trades.
Singapore’s economic strength and stability and its reputation as a financial hub have contributed significantly to having one of the strongest currencies in the region. /TISG
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