The Singapore dollar (SGD) remains strong, trading near decade highs against the US dollar as of June, largely due to continued US dollar weakness. The SGD/USD pair fluctuated around 1.27 to 1.28, marking its highest point since 2014. Analysts attribute this strength to expectations of Federal Reserve rate cuts and growing uncertainties regarding US trade policies, which have led investors to favor safe-haven currencies like the SGD. Despite these favorable conditions, forecasts suggest that further appreciation of the SGD might be limited without more decisive signals from the Fed or a significant shift in market sentiment.
Core inflation in Singapore dipped to 0.6% year-on-year as of May, and the government has downgraded its full-year GDP growth forecast to between 0% and 2%. These economic indicators, coupled with the Monetary Authority of Singapore's (MAS) current policy stance and the SGD nominal effective exchange rate (S$NEER) estimated near the upper end of its allowable band, indicate that MAS may intervene should the SGD trend strongly upward. As the USD/SGD approaches a technical support level near 1.27, analysts are monitoring for potential smoothing operations by MAS if this level is breached.
Looking ahead, analysts suggest that the SGD’s strength might be constrained unless the Federal Reserve adopts a more dovish tone or US economic data shows notable weakness. A modest rebound in USD/SGD towards the range of 1.29 to 1.30 remains plausible if there is a shift in risk sentiment. Key upcoming economic data to watch includes the US Consumer Price Index (CPI) and any insights from the Federal Open Market Committee’s July meeting.
Price data for key SGD currency pairs shows some stability over the past three months. The SGD/USD is currently at 0.7753, slightly below its three-month average, having traded within a narrow 2.7% range. The SGD/EUR is at 0.6687, 1.1% under its average, while trading within a 4.1% range. The SGD/GBP stands at 0.5837, 1.1% above its average, demonstrating strength in this pairing. Meanwhile, the SGD/JPY is at 114.3, only slightly above its three-month average but at a 14-day low, suggesting a potential area of concern for traders in this cross.
Given the ongoing dynamics in the currency markets and trade relationships, stakeholders are advised to stay informed and consider these factors when planning international transactions.
