The Singapore dollar, along with other Asian currencies, is steadily gaining ground against the US dollar. This trend follows the fallout from US tariffs, which have had a noticeable impact on the greenback.
As of this week, the Singapore dollar (SGD) opened at 1.29 against the US dollar – a level not seen since September 2024. In the year so far, the Singapore dollar has appreciated by around 5%. By Friday morning (May 9), in Asian trading, the pair stood at 1.30.
Projections for 2025: What’s Ahead for the Singapore Dollar?
With market volatility and uncertainty continuing to dominate global financial landscapes, experts predict further strengthening of the Singapore dollar. Analysts foresee the Singapore dollar maintaining its upward trajectory, with the exchange rate trading in the 1.26 to 1.29 range for the remainder of 2025.
Wong, an analyst, stated, “Traders may begin to close out their previous bets against the US dollar. Unless a new factor emerges to weaken the US dollar further, we can expect the USD/SGD exchange rate to stabilize and possibly drift slightly higher.”
Looking beyond the immediate future, Maybank anticipates a steady appreciation of the Singapore dollar. They project that the exchange rate will rise from 1.295 to 1.28 by the end of Q3 2025 and further to 1.265 by the end of Q4 2025.
Meanwhile, DBS forecasts the Singapore dollar to remain steady at 1.30 in Q3 2025 and slightly drop to 1.29 in Q4 2025. However, they predict a rebound to 1.27 by the end of 2026.
On the other hand, ANZ Research takes a more cautious view. They expect the Singapore dollar to weaken, forecasting a range of 1.32 to 1.33 for 2025 and the first half of 2026.
ANZ attributes this to the expected impact of the US dollar’s strength, driven by the Monetary Authority of Singapore’s (MAS) modest policy adjustments and other global factors.
Factors at Play: Why is the Singapore Dollar Strengthening?
Saktiandi Supaat, the head of FX research at Maybank, explained that global investors are pulling back from the US dollar, making the Singapore dollar a resilient alternative.
As the belief in “American exceptionalism” fades, investors are increasingly diversifying their portfolios. The term “American exceptionalism” refers to the idea that the US is unique and superior, with its global leadership in areas like trade, technology, and military power, which has historically kept the US dollar as the dominant global reserve currency.
Saktiandi highlighted that the political chaos surrounding former US President Donald Trump’s administration had a significant role in diminishing the premium investors place on US assets. This shift is contributing to the growing attraction of the Singapore dollar.
Moreover, the steady appreciation of the Singapore dollar is supported by Singapore’s own financial and economic stability, along with the Monetary Authority of Singapore’s (MAS) policy stance. This combination makes the Singapore dollar a more attractive investment option than the US dollar.
The Singapore government’s consistent approach has further bolstered confidence in the country’s economy, making its currency a sought-after alternative in times of global uncertainty. Additionally, the country’s robust reserves provide a cushion against external shocks.
The Wider Asian Landscape: Other Currencies Benefit
Singapore is not alone in seeing its currency appreciate. Other Asian currencies are also benefiting from the US dollar’s weakness.
The Taiwan dollar, for example, has surged to its highest level in over 30 years. Meanwhile, the Malaysian ringgit and the Japanese yen – often considered safe-haven currencies – have also strengthened in recent months.
This regional trend indicates a broader shift away from the US dollar, with Asian currencies becoming increasingly attractive to investors looking for alternatives to the greenback.
Impact on Singapore’s Economy: A Stronger Currency’s Mixed Effects
A stronger currency often brings mixed outcomes for an economy. For open economies like Singapore’s, a stronger currency can help mitigate the effects of imported inflation. This is because Singapore, which imports much of its goods priced in US dollars, will now pay less for imports such as oil.
However, while a strong Singapore dollar may reduce the costs of imports, it also makes exports more expensive. This could hurt demand for Singapore’s goods in global markets. A stronger currency can negatively impact export-driven economies, particularly in industries with price-sensitive consumers.
Attracting Capital Inflows and Mitigating Forex Risks
Despite the potential challenges for exports, a stronger Singapore dollar is likely to attract capital inflows. A stronger currency reduces exposure to foreign exchange (forex) risks, making Singapore a more attractive destination for investors looking for stability in uncertain times.
Saktiandi pointed out that while the strengthening of the Singapore dollar may make its exports less competitive, the upside is that it could help attract more foreign investment as businesses and investors seek refuge from the volatility surrounding the US dollar.
Navigating the Global Trade Environment: A Bigger Concern
While currency fluctuations are significant, experts argue that Singapore’s primary concern should not be the competitiveness of its currency but its access to the US market.
Philip Wee, Senior FX Strategist at DBS, noted that Singapore’s biggest worry about US tariffs isn’t the impact on the currency itself, but the secondary effects that these tariffs have on global trade.
“Weakening global demand and disruptions in trade due to US tariffs could be more detrimental to Singapore’s export-driven economy than the exchange rate itself,” said Wee. The city-state’s economy depends heavily on global trade, and any slowdown in external demand could have a considerable impact on its economic growth.
Looking Ahead: The Outlook for 2025 and Beyond
As we look ahead to 2025 and beyond, the future of the Singapore dollar remains uncertain, with multiple factors influencing its trajectory.
Analysts are divided, with some predicting a stronger Singapore dollar, while others anticipate a gradual weakening. The outcome will likely depend on several variables, including global economic conditions, political stability, and the ongoing dynamics of the US dollar’s role in international trade.
The Singapore dollar’s performance in 2025 will continue to be influenced by global trends, and its status as a safe haven currency will likely attract investors looking for a stable alternative to the US dollar. Regardless of the direction, Singapore’s economy is expected to remain resilient, supported by its strong fundamentals and stable governance.