The USD is the global benchmark for currency. When comparing the SGD to the USD, you can see that the SGD has fallen to a 5-year low. This may be surprising to most, because the SGD is stronger than currency for Australia, Japan and Malaysia. All this means is that the SGD is falling at a slower rate than its overseas neighbors. You may be wondering if why the SGD is declining and if it will continue to decline. Keep reading for further answers.
Reasons Why The SGD is Declining
The weak global economy, slow economic growth in Singapore and the USD gaining strength are reasons why the Singapore Dollar is declining in value.
Influence from Global Economy
Investing in neighboring countries with a weaker economy may pay off in the end. However, the Euro, Malaysian Ringgit, Indonesian Rupiah and the Japanese Yen have a declined by more than 15% this year. All currencies are used to trade in Singapore. 31% of Singapore’s non-oil domestic exports are traded to these countries. With the decline in their currency, Singapore goods are more expensive. In other words, the demand for Singapore goods have decreased due to the differences in the SGD and other currencies.
Slow Economic Growth in Singapore
Singapore is currently the third of the richest countries in the world. However, according to the Ministry of Trade and Industry (MTI) the rate of economic growth has decreased. It has only increased by 1.8% from the same time last year. Many factors may be creating the slow growth rate. Many Singapore manufacturers are struggling with dealing with higher expenses due to the increase in trading prices combined with the decrease in export orders. The only way to become competitive again in the overseas market is to weaken the SGD to help boost export markets.
USD Gains Strength
According to DBS, The SGD is considered the second worst performing currency for last month. It has declined 2.6% up against the USD, which is strengthening thanks to the rate-hike outlook issued by the Central bank. This better outlook helps to raise the demand of the USD and puts pressure on other currencies. As a result, the SGD is declining in value.
The projections show that the SGD may fall lower than the 7-year low of 1.5222 against $1 USD that occurred on 31 March 2009.