SINGAPORE: The Singapore dollar has been growing in strength and trading at record levels against several currencies.
For instance, the Japanese yen. At the start of the year, one Singapore dollar would get you about 85 yen. This rose to an all-time high of 99.71 yen on Thursday (Jul 21) – marking an increase of about 17 per cent from the start of the year.
The Singapore dollar also broke its record against the Malaysian ringgit on Thursday as it touched 3.2062, up 4 per cent from about 3.08 at the start of January.
The local currency has been strengthening against the euro and the pound as well, touching historical peaks last week.
Wall Street Journal data showed the euro trading at S$1.4297 on Thursday, just shy of the S$1.3969 low on Jul 14. At the start of the year, one euro could get S$1.5352.
The pound also saw its worst day against the Singdollar on Jul 14, hitting a record trough of S$1.6587. It started the year above S$1.80.
Meanwhile, the Singdollar is trading at multi-year highs against regional peers such as the South Korean won and the Thai baht.
What’s behind the Singdollar’s outperformance against these currencies? A stronger currency is obviously good news for those looking to travel, but are there implications for businesses and the broader Singapore economy? We ask the experts.
WHAT’S HAPPENING?
A divergence in global central bank actions and country-specific factors have swayed the performances of various currencies.
It all starts with a more hawkish US Federal Reserve whose aggressive rate hikes have boosted the US dollar. Investors seeking a haven from global economic uncertainties have also flocked to the greenback, further fuelling the dollar’s ascent against other currencies.
For example, the euro fell below parity against the greenback on Jul 13 for the first time in nearly 20 years. Europe’s single currency has recovered to 1.0176 on Thursday afternoon but remains down against the US currency by more than 10 per cent down year to date.
“The starting point of understanding all these currency movements is the Fed and its rate hikes due to inflation. Then you look at the other countries to see who has or has not matched the United States in terms of rate hikes,” said DBS Group’s senior foreign exchange strategist Philip Wee.