Demand for the city-state’s currency may sustain even as expectations for further MAS policy easing grow, with core inflation in February rising at the slowest pace since June 2021
[SINGAPORE] The Singapore dollar’s outperformance in the first quarter can extend over the near-term, at least according to a Bloomberg analysis of its relationship with other markets.
The city-state’s currency benefits the most in the region when the Bloomberg Dollar Spot Index weakens and also during times when the euro gains versus the greenback, as per a Bloomberg analysis of seven variables based on five years of weekly data. That dynamic is currently playing out.
Singapore’s dollar beat major Asian currencies except for the yen in the first quarter with its 1.7 per cent advance as doubts over US exceptionalism pummelled the greenback, and the euro surged on the region’s defence spending plans. The rally came even as the Monetary Authority of Singapore (MAS), which uses the exchange rate as its main policy tool, loosened its policy settings for the first time in nearly five years in January.
“The Singapore dollar’s outperformance versus peers may continue in the near term, buoyed by its status as a regional safe haven amid rising global trade tensions,” said Stephen Chiu, chief Asia foreign-exchange and rates strategist at Bloomberg Intelligence (BI).
The local dollar’s outperformance has also been helped by “Singapore’s FX-basket policy, with the Singapore dollar nominal effective exchange rate still on an appreciation bias against the basket of currencies of its top trading partners,” BI’s Chiu added. China, Malaysia and US were Singapore’s top trading partners in 2024, according to the nation’s statistics department.
Demand for the Singapore dollar may sustain even as expectations for further MAS policy easing grow, with core inflation in February rising at the slowest pace since June 2021. Economists from Barclays, Bank of America and Citigroup are among those calling for MAS to reduce the slope of its policy band this month.
Meanwhile, the greenback faces depreciation pressure as investors question the currency’s haven status due to US President Donald Trump’s policies and hedge funds have turned bullish on the euro for the first time since September. BLOOMBERG
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