Singapore dollar enjoys safe-haven features. But it’s no greenback or yen
On October 6, 2022, a staff counts the Singapore Dollar Unit notes in the Raffles Place Financial Business region in Singapore.
Roslan Rahman | AFP | Getty Images
During the times of uncertainty, investors are turning to safe-hazen assets-gold, treasures and Japanese Yen, US dollars and Swiss currencies such as Swiss Franc. These assets are expected to maintain or increase their values during market turbulence periods.
Greenback continues to be the world’s preferred currency, weakening. The dollar index has fallen more than 9% to date. The Japanese yen appearance was cloudy because of trade concerns. Against such a fund, analysts argue that there may be an alternative in production: Singapore Dollar.
OCBC FX strategist Christopher Wong told CNBC that SGD has function as a “semi-safe-haven” currency in Asia and developing markets.
“Although it does not have the same global status as traditional safe paradise like USD, JPY [Japanese yen] or chf [Swiss franc]During the financial stress sections – SGD tends to exhibit defense properties, especially during centered in Asia. “He said.
SGD is strengthened against dollars, with Jefferies to date about 6% reported To predict that the currency can reach the parity with the dollar in the next five years.
According to Omar Slim, co -chairman of Asian fixed income in Pinebridge Investments, “SGD is really one of the safe paradise of the world, but it may not be the next safe shelter.
“What makes it a safe shelter is the power of Singapore’s institutional framework, the solid and flexible economic foundations of Singapore, and especially when it comes to financial prudence.” He said.
Felix Brill, VP Bank’s chief investment manager, acknowledges that SGD has many features for a modern safe shelter, including macroeconomic stability, powerful institutions, a large current account surplus and low political risk.
Brill said Singapore’s monetary policy framework provides “extraordinary stability” to the currency, which is exactly what the safe shelter flows are looking for.
Unlike most countries, it does not use interest rates to manage the Singapore currency, but rather strengthens or weakens the Singapore Dollar against a basket of its main trade partners in a policy group. The exact exchange rate is not determined, the SGD exact levels can move within the policy tape that is not disclosed.
Jeff NG, Head of the Asian Macro Strategy in Sumitomo Mitsui Banking Corporation, estimates that the policy group has a 4%wide width and means that SGD’s management is limited in the short term lower risks and more accuracy.
Obstacles
While the SGD is on the right track, the experts said that there are some barricades towards becoming the next widely accepted global secure currency.
The first is the size of the SGD market. Data International Bank Bank in 2022 The USD revealed that 88% of the forex market, Yen and Swiss francs constituted 17% and 5% respectively. Singapore dollar increased only 2%. The BIS survey is conducted every three years, the next September 2025.
“Although Singapore is respected, Singapore has a small economy and does not have the depth of the trade volume or bond market of the SGD or Franc.” He said.
Moreover, Singapore’s monetary policy, which provides extraordinary stability for SGD, is what restricted it.
Brill explains as the currency “managed”, limits market speculation and large -scale positioning, which limits the liquidity and depth. These are the basic features that investors seek in a real global secure shelter.
“So yes, the frame helps reliability – but it prevents the scale.” He said.
Other factors include Singapore’s export -related economy. The figures from the World Bank show that exports have been created 178.8% of the GDP of the city state In 2024.
According to Natixis Corporation & Investment Banking Senior Economist Trinh Nguyen, Singapore’s money authority may not be an appetite for SGD to appreciate too much.
“If investors buy too many SGD assets, this will increase SGD,” Niguyen said, “If SGD cannot compete … MAS does not tolerate it as it deems harmful to Singapore’s competitiveness.”
SGD can be used to reduce the risk of currency. Bank of Singapore Global Investment Officer Jean Chia, SGD’nin “diversifying a very important role in terms of diversification said … So, most of your money diversification discussions can be the third currency.”
Experts, Singapore’s currency, although not yen or Greenback, but the Swiss Franc equivalent to the status of gradually admitted that the potential to acquire.
VP Bank’s Brill drew attention to the fact that the safe shelter status has been built for decades of crisis-replacement behavior for decades, and although SGD performed well during Asian declines, it is not yet the first call port during global slows.
“Over time, more international use, more accessible local markets and consistent stability can gradually change it.” Brill said. He said.
Pinebridge’s Slim, SGD’s traditional safe attractiveness of the attractiveness of the attractiveness of a hit at a time optimistic: “The world is increasingly looking for safer paradises and I would expect SGD to be at the top of this list … Although not as the traditional of the USD and JPY, it will be increasingly seen as the chf of Asia.”
Jen-Ai Chua, the Asian Research Analyst in Julius Baer, was more optimistic, saying that SGD did not ignore that Asia could develop from being a safe shelter to a global shelter, but it may take time.
