The Singapore Dollar started the year with a poor performance, but regained many of its losses in April. The currency is now trading at around 1.324 to the US Dollar – similar to where it was at the beginning of this year.
Weak economic numbers from the United States, along with the lack of change in the policy rate from the Monetary Authority of Singapore, helped support the Singapore Dollar and its recent turnaround.
But economists are bearish on the Singapore Dollar despite its recent strength. They expect more deprecation against the greenback later this year and into the future.
“We don’t expect the Sing dollar to depreciate dramatically because of MAS signal, whereas against the US dollar, if the US dollar starts to strengthen on a broad-based basis, that’s not going to hold it back in terms of deferring to the Sing dollar.” said Vishnu Varathan, Head for Economics, Markets and Strategy at Mizuho Bank’s Singapore office.
“So, Sing dollar can still depreciate against the US dollar – especially with the Fed’s rate hikes coming up,” explained Varathan.
Economists from Mizuho Bank believe the Singapore Dollar may reach the 1.38-1.39 level against the US dollar. Mizuho expects this to happen in the short term before heading into 2016 at 1.30-1.32.
Singapore Dollar Not Alone, Other Currencies Not Spared
The Singapore Dollar is certainly not alone in its recent weakness. In fact, most currencies in Asia and around the world have suffered even worse in their depreciation against the US Dollar.
The Malaysian Ringgit had a very bad year. It suffered from not only a stronger dollar, but a fall in oil prices causing a drop in exports. Palm oil and petroleum are some of Malaysia’s largest exports, and the Ringgit’s strength relies on the price of these commodities.
The Thai baht was Asia’s best performing currency in 2014 and was one of the few not to see a massive drop in line with others in ASEAN and East Asia.
However, a policy rate cut by the bank of Thailand saw the baht break past a key resistance level of 33.00 to the USD.
Even the Chinese Yuan, which faced a consistent appreciation against the greenback, has joined its regional peers. The yuan fell from 6.05 to the USD at the beginning of 2015 to 6.20 at the end of April.
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