Q: Will the Singdollar strengthen or weaken, and why is the US dollar so strong now? How does this affect my daily life?

A: The outlook for the Singapore dollar depends on the foreign currency you are measuring it against.

The US dollar has indeed strengthened against almost every other currency in the world, including the Singdollar. Indeed, the US Federal Reserve has taken aggressive measures to fight inflation by raising interest rates sharply. In general, rising interest rates tend to attract greater demand for a currency, which in turn increases its value. We expect the US dollar to continue rising slightly against the Singdollar through the end of this year from its current level of 1.40.

At the same time, the Monetary Authority of Singapore (MAS) has also introduced several rounds of monetary policy to support the Singdollar and keep inflation in our shores under control. Unlike many other central banks, the MAS uses currencies and not interest rates as its primary policy tool.

Simply put, it buys and sells Singapore dollars to keep our currency within a predetermined range against those of our major trading partners. Recent MAS policy moves should help the Singdollar stay strong against regional currencies such as Malaysian Ringgit, Indonesian Rupiah, Thai Baht, and even Chinese Yuan and Japanese Yen.

This can work to our advantage in different ways. First, the relative strength of the Singdollar serves as a buffer for returns on our Singapore dollar-denominated investments.

Beyond that, what most of us can notice is that our purchasing power increases when we travel or spend abroad. For example, 1 Singapore dollar is now worth more than 100 yen, which was unimaginable just a year ago when 1 Singapore dollar was worth around 85 yen.

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