Singapore’s currency weakness against the 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 show 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 Jan 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 Singapore MUFG Bank currency strategist 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.
Furthermore, currencies across Asia have dropped to multi-year lows against the US dollar, as investors brace for an inflationary impact from US tariffs and pare expectations for further Federal Reserve (Fed) 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 and now sits around 1.37 per US dollar.
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 2% mark that officials have deemed consistent with price stability.
The emerging consensus among analysts is that the MAS will pivot in 2025 and that the Singapore dollar will weaken, even if there’s disagreement about how soon officials will change tack.