8 hrs ago
Singapore Dollar Gains as Dollar Debasement Trade Accelerates
The Singapore dollar has been moving almost opposite to the US dollar.
This means it could rise when the US dollar falls.
Analysts think this may happen if investors worry about US government finances and move money into other currencies.
Singapore’s economy is also growing strongly.
Its central bank has allowed the currency to become stronger.
The country has a strong financial reputation and a top AAA credit rating.
These features can attract investors looking for safer places to put money.
One bank expects the Singapore dollar to reach 1.26 per US dollar by the end of the year.
The Singapore dollar’s 120-day correlation with the US dollar has fallen to -0.94, the most inverse relationship in Asia.
Analysts say US political and fiscal uncertainty could accelerate demand for alternatives to the greenback.
The Singapore dollar gained 1.8% this quarter, leading Southeast Asian currencies.
The Monetary Authority of Singapore tightened policy in July for a second consecutive review by increasing the currency’s appreciation rate.
ANZ forecasts the Singapore dollar will strengthen to 1.26 per US dollar by year-end, compared with about 1.27 on Thursday.
- Who
- The Singapore dollar, the Monetary Authority of Singapore, investors, and currency analysts and strategists quoted in the report.
- What
- The Singapore dollar is strengthening as analysts identify it as a potential beneficiary of US dollar weakness and the dollar debasement trade.
- Where
- Singapore and international foreign-exchange markets.
- When
- The currency gained 1.8% this quarter; policy was tightened in July, and the dollar debasement trade accelerated in mid-August.
- Why
- US political and fiscal uncertainty, Singapore’s strong economic and fiscal fundamentals, monetary-policy tightening, and investor demand for alternatives to the US dollar are supporting the currency.
Key facts
- Singapore dollar correlation
- Its 120-day correlation with the US dollar fell to -0.94, the most inverse relationship in Asia.
- Quarterly performance
- The Singapore dollar rose 1.8% this quarter, leading Southeast Asia.
- Monetary policy
- The Monetary Authority of Singapore increased the rate of appreciation of the local dollar in July, its second consecutive tightening decision.
- Singapore growth outlook
- The government raised its growth forecast for the year to 4.5%-5.5%, from 2%-4%.
- Exchange-rate forecast
- Australia and New Zealand Banking Group forecasts the Singapore dollar at 1.26 per US dollar by year-end; it traded near 1.27 on Thursday.
- Investment measures
- Singapore pledged potentially lucrative tax exemptions for individual fund managers to attract asset-management business.
- Credit rating
- Singapore’s AAA credit ratings were cited as an additional attraction for investors.
Quotes
Wee Khoon Chong
Senior market strategist for Asia Pacific at BNY in Hong Kong
“The Singapore dollar is one of the most stable currencies in the region and typically benefits from flight to safety flows.”
livemint.com
“with the Singapore dollar in particular with its monetary policy tilted toward the appreciation of the exchange rate”
livemint.com
Sources
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