After outperforming the greenback and touching levels last hit more than a decade ago, the Singaporean dollar is now reversing course, and we expect this weakness to extend over upcoming quarters.
 
Under our baseline scenario, the US dollar could appreciate a little further as incoming president Trump’s policy platform is put in place, the American economy continues to outpace its peers, and interest rate expectations remain tilted toward US assets. At the same time, Singapore’s small, open economy might suffer the consequences of a slowdown in world trade and production trends.

Singapore’s small, open economy is exposed to global trade flows
Singapore gross domestic product growth, %
Q4 2000 – Q3 2024

Negative regional and global growth risks, in conjunction with moderating domestic inflation, should open the door to the Monetary Authority of Singapore gradually pivoting away from its hawkish policy stance in the first half of 2025. A more dovish turn could take the form of a reduction in what the Authority calls the “prevailing rate of appreciation” in the Singapore dollar nominal effective exchange rate (previously 1.5% per annum).

Will the MAS shift course to help cushion external risks?
Singapore Dollar Nominal Effective Exchange Rate estimates
January 2017 – November 2024