The Singapore dollar (SGD) is facing mounting challenges on multiple fronts. As tensions rise over new US tariff threats and analysts anticipate an imminent policy shift by the Monetary Authority of Singapore (MAS), downward pressure on the local currency is becoming increasingly evident.
Here’s a closer look at the economic forces at play and what they mean for businesses, investors, and the broader Singaporean economy.
New Tariff Threats from the US Raise Concerns
Recent remarks by US President Donald Trump have rattled global markets. His indication that new tariffs could be levied on pharmaceuticals and semiconductors—two of Singapore’s major export categories—has intensified the economic uncertainty facing the city-state. If implemented, these sector-specific tariffs could take effect as early as August 1, directly impacting Singapore’s trade-dependent economy.
According to Moh Siong Sim, a currency strategist at Bank of Singapore, this uncertainty “could add to growth headwinds for Singapore in the second half of the year.” He also noted that rising US tariffs may delay Federal Reserve rate cuts by stoking American inflation—further supporting the greenback and weakening the Singapore dollar.
Speculation Grows Over MAS Policy Easing
Adding to the bearish outlook for the SGD is increasing speculation that the MAS may ease monetary policy at its next meeting in late July. Unlike other central banks that control inflation through interest rates, the MAS operates a unique monetary policy by adjusting the Singapore Dollar Nominal Effective Exchange Rate (S$NEER) policy band.
Currently, the SGD is trading near the top end of this policy band. Flattening the slope of the band would effectively reduce the rate of SGD appreciation, making the currency less attractive to investors seeking strong returns.
Barclays economists expect MAS to take preemptive action this month by flattening the slope of the S$NEER policy band by 50 basis points to zero. This move, if it materializes, would signal MAS’s intent to support growth amid rising external headwinds.
Inflation Data and Monetary Policy Outlook
Upcoming inflation data is likely to support an easing stance. Core inflation for June—scheduled to be released on July 23—is expected to show a moderate 0.7% year-on-year increase, indicating that inflationary pressures remain tame.
Priyanka Kishore, principal economist at Asia Decoded, also highlighted Singapore’s vulnerability to additional US tariffs and a possible increase in the general tariff rate to 10% in early August. With inflation subdued and external risks rising, she expects the MAS to lean toward a more accommodative policy.
“Our bias is for further Singapore dollar weakness,” Kishore said, noting the dual impact of policy easing and external economic challenges.
Currency Market Dynamics and Carry Trades
The Singapore dollar’s performance is not only affected by domestic policy and trade flows but also by its role in carry trades. These trades involve borrowing in low-yielding currencies like the SGD and investing in higher-yielding alternatives such as the Indonesian rupiah.
Bloomberg Intelligence revealed that three out of four of its emerging-market currency models are currently long on the rupiah and short on the Singapore dollar—a trend that could further weigh on the SGD in the near term.
As of 6:15 p.m. on July 21, the Singapore dollar was trading at 1.2830 per US dollar, retreating from earlier gains this year. Although the SGD had appreciated 6% year-to-date, the recent global developments suggest that momentum may be stalling.
What’s Next for the Singapore Dollar?
If US tariffs are indeed rolled out in August and the MAS flattens the S$NEER slope as expected, the Singapore dollar may drift further downward—potentially reaching 1.30 to the US dollar in the near term.
While the MAS’s cautious approach aims to balance inflation control with economic support, global investors and businesses should prepare for a more volatile environment.
What This Means for Singaporeans
For consumers and businesses, a weaker SGD could mean:
- Higher import costs, particularly for goods priced in US dollars
- Potential inflationary spillovers despite low current inflation
- Impacts on travel and overseas education, with expenses rising for those using USD or other stronger currencies
- Greater pressure on export-reliant sectors, especially those tied to tech and pharmaceuticals
However, a weaker currency might also boost Singapore’s export competitiveness over time, especially if other regional currencies strengthen further.
Final Thoughts
As the global trade and monetary landscape continues to shift, the Singapore dollar finds itself at a critical juncture. Policymakers at MAS will need to weigh external risks, domestic inflation, and overall growth before making their next move.
For now, both economists and market watchers appear aligned: expect continued weakness in the SGD—and prepare accordingly.
For more updates on Singapore’s economy and currency trends, keep following our blog.
