Singapore dollar strength a boon for holidaymakers and students in the US

Straits Times

2 days ago

The impact of a stronger Singdollar against the US dollar has been mixed for businesses and their customers. PHOTO: LIANHE ZAOBAO
Singapore dollar strength a boon for holidaymakers and students in the US
SINGAPORE – The strength of the Singapore dollar against the greenback is providing significant financial relief to parents whose children are studying in the US and holidaymakers headed there during the June school holidays.
The Singdollar has strengthened 6 per cent to 7 per cent against a weakening US dollar in 2025 – the strongest year-to-date performance in the last 20 years.
It has been trading recently largely below 1.3 to one US dollar – as low as around 1.28. It reached a 10-year high against the US dollar in 2024 when it hit 1.28.
This means that every Singdollar sent to cover tuition, accommodation and living expenses now buys more US dollars than before.
'This reduction in costs can alleviate some of the financial burden, allowing parents to allocate resources towards other aspects of their children's education or travel within the US,' said Mr Christopher Wong, foreign exchange (FX) strategist at OCBC Bank.
A Singaporean parent paying a US$30,000 annual tuition fee would have needed $40,500 at the start of 2024 when the exchange rate was closer to 1.35 Singdollars to one US dollar. With the exchange rate at 1.28, the same tuition now costs around $38,400 – a saving of $2,100.
The weakening of the US dollar against the Singdollar has also been a boon for Singaporean holidaymakers who will find their travel budgets stretching further in the US.
Accommodations, dining and entertainment options can potentially be less expensive, provided that US merchants do not raise prices, Mr Wong said.
One avid Singaporean traveller said he is even considering luxury safaris and tours to exotic places like Antarctica – where prices are often quoted in US dollars – as they have become more affordable.
A Singaporean homemaker who buys her arts and crafts supplies from the United States is happy as she now coughs up less for her hobby.
Beyond families enjoying reduced education costs and greater purchasing power overseas, the effect of a firmer Singdollar is also felt elsewhere – by importers and exporters to inbound visitors.
A Filipino tourist who recently visited Singapore to attend American pop star Lady Gaga's concert said it was an expensive holiday for him.
Since the start of 2025, the Philippine peso has lost some ground against the Singdollar. He had to exchange about 43.13 pesos for one Singdollar. This compares with January 2024, when he needed 41.95 pesos to get one Singdollar.
The stronger local currency against the US dollar has been mixed in its impact on businesses and their customers.
Typically, it should benefit companies with big expenses in US dollars. These include airlines, which spend about 30 per cent of their expenses on US dollar-traded jet fuel.
However, in the case of Singapore Airlines, its hedging policies would result in a negative $1.6 million impact on its pre-tax profit for every 1 per cent strengthening of the Singapore dollar against the US currency, according to its fiscal year 2024 annual report.
Meanwhile, the chief executive officer of a Singapore-based building materials company said it has benefited him as he imports raw materials in US dollars.
However, some of his Asean customers are feeling the pain as he sells his products in the Singdollar.
'Export-oriented businesses in Singapore may face challenges as the US dollar weakens against the Singdollar. A stronger Singdollar can make Singaporean exports more expensive for foreign buyers, potentially reducing demand for our goods in international markets,' OCBC's Mr Wong said.
Underpinning the Singdollar is its appeal as a safe haven, especially in an uncertain environment as a result of the US' tariff wars; Singapore's solid fundamentals; and a softer US dollar trend as investors shy away from US assets.
Ms Jen-Ai Chua, equity research analyst at Julius Baer, has a three-month forecast of 1.32 Singdollar to one US dollar.
'While the USD/SGD currency pair is largely influenced by broader US dollar movements, recent FX policy easing by the Monetary Authority of Singapore (MAS) and potential further easing ahead could weigh on the Singdollar in the coming months,' she said.
Mr Sim Moh Siong, FX strategist at the Bank of Singapore (BOS), sees the Singdollar trading around 1.26 to one US dollar from now to June 2026.
He said it is unclear whether the MAS will continue loosening its monetary policy when it next meets in July, or hold it off until the October meeting.
Greater clarity is needed, notably on how much of Singapore's so-far resilient growth is a result of front-loading by businesses racing to beat US President Donald Trump's new tariffs.
Front-loading – which temporarily lifts exports – artificially boosts growth, especially in the electronics sector, and growth could slow in the second half of the year, Mr Sim said.
The central bank had eased its policy stance in its January meeting – the first time since 2020. It again eased its monetary policy in April.
As for the US dollar, headwinds persist, the BOS FX strategist said, pointing to the outlook for the US economy as the most immediate one.
'Tariff uncertainty is still lingering in the background. The average effective tariff rate that the US has imposed is still higher than at the start of the year. We are talking about 18 per cent relative to 2 per cent to 3 per cent. That's a very large tax hike for the US consumers,' Mr Sim said.
Other concerns include the US public debt and fiscal health.
Mr Trump's sweeping tax Bill would add US$3 trillion to US$5 trillion to the country's debt, according to some estimates.
There are also concerns over the independence of the US Federal Reserve once its chairman Jerome Powell retires in May 2026 , Mr Sim said.
'The world trusts the US dollar because it trusts the Federal Reserve in keeping inflation low and stable around 2 per cent. If this independence is compromised, then there is a risk of high inflation and that might erode trust in the US dollar,' he said.
Despite the foreign exchange risks, the US dollar remains a popular choice for parking funds – whether for overseas investments, salary crediting, savings or transactions.
Some banks also offer higher fixed deposit rates for the greenback than Singdollar deposits.
For example, DBS Bank is offering 4.06 per cent per annum interest based on a two-month deposit of below US$10,000. Customers get 4.16 per cent for a placement above US$100,000 based on a two-month tenor.
OCBC Premier Banking has a promotional rate for US dollar time deposits, where customers get 4.2 per cent per annum for a three-month tenor on a minimum sum of US$50,000.
UOB has seen an 80 per cent increase in US dollar fixed deposits for April, compared with the monthly average from January to March , said Ms Jacquelyn Tan, head of group personal financial services at UOB.
The bank also saw an increase of 42 per cent in conversion volume from Singdollar to US dollar in April when compared with the monthly average from January to March , she said.
UOB is offering 3.76 per cent per annum for US dollar deposits of less than US$50,000 with a two-month tenor.
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