The Singapore dollar-to-US dollar exchange rate reached six-month highs this morning at 0.7231 following new predictions from Singapore’s Ministry of Trade and Industry (MTI) that economic growth in the country will exceed 2% this year.
“Barring the materialization of downside risks, GDP growth is likely to come in higher than the 2% achieved in 2016,” said the MTI.
This morning also saw the release of revised Singapore Q1 GDP data – also supplied by the MTI. On April 13th, the MTI had said that Singapore’s economy had contracted (negative growth) at the end of Q1 at an annualized 1.9%. This figure has now been revised up to a contraction of only 1.3%, which represents a second piece of good news for SGD bulls today.
Singapore has been on something of a growth roller coaster recently. In Q4 of last year, GDP growth had been a whopping 12.3%, but prior to that the country experienced another contraction of 0.4%.
Singapore’s economy is, more than most, heavily reliant on external trade, especially that done with China, and its economy is vulnerable to changes in global activity trends and foreign investor sentiment, both of which can change quickly and which make GDP in the small city-state unpredictable. In 2016, after the MTI had lowered their expectations for GDP growth to 1-to-1.5%, a sudden pickup in global demand for electronic goods meant that realized growth came in at 2%, or double the lower boundary of the MTI’s forecast.
Currently, Singapore’s economy is benefitting from a rebound in exports but will remain vulnerable to global economic and political factors including potential US protectionism, uncertainty in Europe over UK-EU ‘Brexit’ negotiations and the health of China’s economy.
Singapore Dollar Strong Despite China Concerns
Yesterday, BestExchangeRates.com reported on the downgrade of China’s sovereign debt by US ratings agency Moody’s – the first downgrade of China by the agency since 1989. Fortunately, the Singapore dollar, like other Asian currencies, shrugged off the news and finished yesterday strongly.
SGD/USD rose yesterday by 0.4% to 0.7222 and has added to gains following this morning’s news. As mentioned earlier, the current SGD/USD rate stands at 0.7231 (as of 04:05 GMT) – a fresh six-month high.
Any further rally in the SGD/USD rate may stall around 0.7245-50 (or close to the USD/SGD equivalent rate of 1.38), a level which acted as strong support in the pair during May 2016. In the field of technical analysis, a price support level, once broken, will be considered price resistance when revisited (or ‘retested’) by the market.
The Singapore dollar has now made back more than 50% of its losses against the US dollar since June of last year when SGD/USD briefly managed to push above 0.75. By early-January the rate had fallen to just 0.6897.
Readers in need of Singapore dollars or looking to convert their current dollars into foreign currency should check out BestExchangeRates.com’s online comparison calculators for SGD travel money and SGD foreign currency transfers. Businesses negatively impacted by any further increase in the value of the Singapore dollar can consider managing their exposure using an FX forward or option.
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