Recent developments in the currency markets highlight contrasting trajectories for the Singapore Dollar (SGD) and the Indian Rupee (INR), affecting the SGD to INR exchange rate. As of the latest data, the SGD is trading at 69.42 INR, which is 1.4% above its three-month average of 68.47, indicating a period of relative strength for the SGD.
The Monetary Authority of Singapore (MAS) made significant adjustments to its monetary policy in January by easing the slope of the exchange rate policy band. This decision was driven by a need to support economic growth given lower-than-expected core inflation projections. In October, MAS affirmed its monetary stance following a stronger-than-anticipated economic performance, with a year-on-year growth of 2.9% in the third quarter, well above market forecasts. These indicators suggest that the SGD may continue to gain strength in the near term as the economy expands, barring any adverse external factors.
Conversely, the Indian Rupee is under considerable pressure, having recently hit a historic low of 90.42 per U.S. dollar, reflecting a 5% decline over the past year. The widening trade deficit and substantial tariffs imposed by the U.S. on Indian exports are central to the INR's struggles. This situation has caused market analysts to predict that without significant changes, the rupee could further depreciate, with some estimates suggesting it could reach 92 against the dollar soon.
The Reserve Bank of India (RBI) is reportedly adopting a more tolerant stance towards the rupee’s decline, prioritizing stability over defending a specific exchange rate amid diminishing dollar inflows and increased demand for foreign currency. The withdrawal of nearly $17 billion by foreign investors from Indian markets further compounds the pressure on the rupee.
Given these dynamics, the SGD is likely to remain robust against the INR in the short to medium term, especially if Singapore’s growth continues to outperform expectations while the INR's trajectory remains influenced by widening trade deficits and foreign capital outflows. Analysts suggest that international transaction strategies should reflect these shifting parameters to maximize currency conversion efficiency.
