S'pore Dollar Pressured By Tariff Threats And MAS Easing Signals

BusinessToday

16 hours ago

The Singapore dollar is facing mounting pressure amid fresh US trade tensions and rising speculation that the Monetary Authority of Singapore (MAS) could ease its policy stance this month.
In what may be a turbulent few weeks ahead, analysts say the city-state's currency is likely to weaken further against the US dollar. On Monday morning, it stood at S$1.2846 per greenback. But that figure may slide closer to S$1.30 soon, especially if US inflation stays elevated and pushes back expectations for a rate cut by the Federal Reserve.
'The tariff uncertainty, with higher tariffs on pharmaceuticals likely Aug. 1, could add to growth headwinds for Singapore in the second half,' said Moh Siong Sim, currency strategist at Bank of Singapore.
US President Donald Trump's threats of fresh levies on pharmaceuticals and semiconductors — two of Singapore's key exports — have added a layer of uncertainty to the outlook. The potential for further economic headwinds is prompting expectations that the MAS may act sooner rather than later.
Barclays economists, in a note last week, projected the MAS will flatten the slope of its Singapore dollar nominal effective exchange rate (S$NEER) policy band by 50 basis points to zero when it meets this month — a more dovish move than waiting until October.
Unlike central banks that tweak interest rates, the MAS manages inflation through adjustments to the S$NEER band. Currently, the exchange rate is trading near the top end of that band. A flatter slope would effectively limit the currency's strength against its trading partners.
'With the MAS likely to stay on an easing path and flatten the slope of the S$NEER this month, our bias is for further Singapore dollar weakness,' said Priyanka Kishore, principal economist at Asia Decoded.
She also warned that Singapore may be hit with a rise in the US base tariff rate from 10%, on top of specific sectoral duties. 'Singapore is not only at a disadvantage from the prospect of sectoral tariffs on pharmaceuticals and semiconductors, but may also see an increase in the base rate of 10% on Aug. 1,' she said.
Economists widely expect core inflation data due July 23 to come in at just 0.7% year-on-year for June — a key factor reinforcing the case for MAS policy easing.
Meanwhile, Bloomberg Intelligence analysts have flagged that the Singapore dollar is increasingly used in funding carry trades. According to their models, investors are already going long on the Indonesian rupiah while shorting the Singapore dollar — a strategy that reflects weakening sentiment on the city-state's currency.
As trade pressures mount and monetary policy turns more dovish, the road ahead looks rough for the Singapore dollar.
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