Singapore dollar has shot at climbing to parity, Jefferies says
(Bloomberg) — There's a chance the Singapore dollar will strengthen to parity against its US counterpart in the next five years, according to Jefferies Financial Group Inc.
The island's currency has appreciated against virtually all its major peers since the Federal Reserve began raising interest rates in March 2022, confirming its role as the 'Swiss franc of Asia,' strategist Christopher Wood wrote in the firm's Greed & Fear newsletter.
Switzerland is likely to return to negative rates sooner rather than later, based on discussions with investors in Zurich, while Singapore's bond yields still look attractive to conservative money focused on wealth preservation, Wood said.
'It is not so far-fetched to project the Singapore dollar trading to parity against the US dollar on a five-year view, which implies an appreciation of 28 per cent,' Wood wrote.
The Singapore dollar has gained more than 6 per cent versus its US peer this year, while Bloomberg's Asia Dollar Index has risen just 3.9 per cent.
The Swiss National Bank cut its benchmark interest rates to zero in June, and signalled it was ready to go further to push back against franc appreciation. Swiss 10-year government bonds currently yield around 0.4 per cent, versus a level of about 2.15 per cent for similar-maturity Singapore debt.
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