ANN/THE STRAITS TIMES – Singapore’s currency weakness against the United States (US) dollar is likely to endure amid expectations that its central bank pivots to easing and US tariffs ripple through the global economy.
The Singapore dollar is already near a two-year low against the US dollar, and options data shows trading of bearish wagers is dominating the market in anticipation of the Monetary Authority of Singapore (MAS) adjusting its stance.
Investors wager that may take place on January 24, though a move later this year is also possible, which would allow more time to see how Donald Trump retaking the US presidency plays out.
Singapore is one “of the most vulnerable economies to US tariff hikes in the Asean region”, said currency strategist at MUFG Bank in Singapore Lloyd Chan. He predicts the MAS will ease policy in January by slightly reducing the slope of its currency band.
BNP Paribas also sees an imminent pivot, with the currency set to slip to 1.40 over the year ahead.
Currencies across Asia have dropped to multi-year lows against the US dollar, as investors brace themselves for an inflationary impact from US tariffs and pare expectations for further Federal Reserve easing.
The Singapore dollar touched 1.2789, its highest level in a decade, versus the greenback just four months ago – but has weakened steadily since, sitting at 1.3655 per US dollar as at 11.23am Singapore time yesterday.
While the MAS’ parameters for its currency band have stayed the same for more than a year, an abating of price pressures in Singapore has opened the door to a policy shift. Core inflation – which strips out volatile elements such as food and fuel – has dropped below the two per cent mark that officials have deemed consistent with price stability.
