SINGAPORE – The Singapore currency extended gains to touch a fresh 2024 high versus the US dollar as forecasts for the local central bank to keep a tighter monetary policy relative to the US Federal Reserve in 2024 favoured the Asian currency.
The Singapore dollar began rallying in August and is the third-best performer among Asian currencies so far in 2024, after the Malaysian ringgit and the Hong Kong dollar.
On Aug 14, it rose as much as 0.1 per cent from its previous close to 1.3163 per US dollar, the highest since Dec 28 and up 3.6 per cent from its year’s low of 1.3655 posted on April 30. The Singdollar was trading at 1.3152 at 8pm local time.
The Monetary Authority of Singapore (MAS) is seen easing only in 2025, while bets are increasing for the Fed to cut interest rates as soon as September, a move that reduces the appeal of the US dollar. A gauge of Asian currency performance jumped to the highest since March as a retreating greenback boosted exchange rates across the region.
“The trade-weighted SGD will continue to be supported by MAS’ existing appreciation setting which is unlikely to change this year, unless we get a US recession,” said Dr Alvin Tan, head of Asian currency strategy at Royal Bank of Canada (RBC) in Singapore.
Singapore now sees the economy growing in 2024 by between 2 per cent and 3 per cent, narrowing its forecast from an earlier projection of 1 per cent to 3 per cent. A July non-oil domestic exports report due on Aug 16 is expected to show a slight rebound, after registering five straight months of contraction.
The Singdollar outperformed Asian peers in 2022 and 2023, but its fortunes could change in 2024.
“The Singapore dollar may find it harder to end 2024 at the top of the Asia FX league table, as the initiation of Fed rate cuts could buoy risk-on sentiment and the Singapore dollar tends to underperform in a broad dollar downtrend,” Bloomberg Intelligence strategists Stephen Chiu and Zhang Chunyu wrote in a note this week.
RBC’s Mr Tan also sees Singapore’s currency weakening to 1.35 per US dollar by year-end on expectations for a greenback rebound. A median estimate in a Bloomberg survey forecasts the Singapore dollar at 1.34 over the same period. BLOOMBERG
