What is USD/SGD?
The USD/SGD is an exotic currency pair that represents the exchange rate between the US dollar and the Singapore dollar, or the number of Singapore dollars (the quote currency) required to purchase one US dollar (the base currency). In terms of exotic pairs, USD/SGD has a relatively high volume and is quite volatile, providing opportunities for trading.
The US dollar is the most widely traded currency in the world, and it is held by the vast majority of central banks and financial institutions. Because of its stability and dependability, the dollar is the currency of choice for international transactions and reserves. Furthermore, the dollar's dominance in international trade has significant implications for global exchange rates and economic policy, and it may serve as a benchmark for nations that desire to set or peg their currencies to the dollar's value.
The Singapore dollar became the country’s official currency in 1967 after Singapore seceded from the Republic of Malaysia; it is also accepted as legal tender in Brunei. SGD, sometimes known as the "sing" in the currency market, has been one of the best-performing currencies since the 2008 global crisis. This is due in part to Singapore's growth as a financial centre with a good regulatory environment, which makes it appealing to firms and investors.
What affects the price of the USD/SGD pair?
The monetary policy decisions of the Monetary Authority of Singapore (MAS), Singapore's central bank, play a crucial role in determining the value of the Singapore dollar against the USD. A key factor to consider is interest rate differentials, or the difference in interest rates between Singapore and the United States. When there is a higher interest rate in Singapore compared to the US, it attracts foreign investors, increasing demand for the Singapore dollar and thus strengthening its value against the USD.
Another factor is the MAS’s monetary policy, which includes managing inflation and ensuring price stability and influences the value of the Singapore dollar. By adjusting interest rates or implementing other measures, the MAS can impact the supply and demand dynamics of the currency.
Since 2019, geopolitical events and external developments, such as the trade conflict between the United States and China, have had a direct impact on the currency of Singapore's export-driven economy, which exhibits a positive correlation with the Chinese yuan (CNY). These events have led to fluctuations in the Singapore dollar's value as investors react to shifting trade dynamics and market volatility. In addition, the trade dispute has affected Singapore's export sector, resulting in potential supply chain disruptions and decreased demand for Singaporean products.
What to watch out for when trading USD/SGD?
Traders of USD/SGD should keep an eye out for announcements from key influential bodies in the US and Singapore. These include:
- US Federal Reserve and Monetary Authority of Singapore (MAS) for Interest Rates and shifts in monetary policy
- US economic data (GDP, CPI inflation, Employment Change, Manufacturing/services PMI, Consumer Sentiment)