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On October 6, 2022, the employee considers Singapore’s currency notes to Raffles Place Place Business Colline in Singapore.
Roslan Rahman | AFP | Gets the image
In times of uncertainty, investors resort to active assets-flour, treasury, as well as currencies such as Japanese, US dollar and Swiss Frank. These assets are expected to retain or increase their cost during periods of market turbulence.
While Greenback remains a global currency of choice, it is weakening. The dollar index has decreased by 9%today. The forecast for Japanese was clouded by trading worries. Against this background, analysts believe that there may be an alternative: a Singapore dollar.
Christopher Wong, FX strategist at OCBC, said CNBC that the SGD is already functioning as the Quasi Safe-Haven currency, especially in Asia’s markets and new markets.
“Although it does not have the same global status as traditional safe shelters such as USD, JPY (Japanese), or CHF (Swiss Frank), SGD seeks to reveal defensive characteristics during financial stress episodes – especially in Asia.” said Wong.
SGD is enhanced to dollar, gaining about 6% of the year today, with Jefferies justify Predicting that currency can reach a parity with the dollar in the next five years.
“SGD is indeed one of the safe shelter in the world, but it may not be” the next safe shelter “, according to Omar Slima, co -chair with fixed Asia’s fixed income in Pinebridge Investments.
“What makes it a safe shelter is the force of the Singapore institutional framework, the lasting and elastic economic foundations of Singapore, as well as a strong policy, especially when it comes to financial prudence,” he said.
Felix Brill, Chief Investment Director VP Bank, agrees that the SGD has a lot of characteristics of modern safe shelter, including macroeconomic stability, strong institutions, a large excess account and low political risk.
Brill said that the framework of the monetary policy of Singapore conveyed “exceptional stability” of currency, and exactly what the safe shelter is.
Unlike most countries, Singapore does not use interest rates to manage its currency, and instead strengthens or weakens the Singapore dollar on the basket of its major trading partners in politics. The exact course is not set, and the SGD may move within the set policy range, the exact level of which is not revealed.
Jeff NG, Head of the Macro -Strategy Department of Asia in the Sumitomo Mitsui Banking Corporation, believes that in the 4%wide range, and said that this SGD management means there is limited volatility, which gives a reduced risk and more confidence in the short term.
Interference
While the SGD is on the right track, experts have stated that there are some checkpoints on the way to the next widespread global security.
The first is the SGD market size. Data from Bank of International Settlements in 2022 It turned out that USD was 88% of the forex market, while it and the Swiss franc accounted for 17% and 5% respectively. The Singapore dollar was only 2%. The BIS survey is conducted every three years, the next one in September 2025.
“Although Singapore is very respected, it has a small economy, and in the SGD there is no trading or depth of the bonds of it or franc,” said VP Bank.
In addition, the monetary policy pursued by Singapore, which provided exceptional stability for the SGD, is what holds her.
Bryl explains how the currency is “controlled”, it limits speculation in the markets and large -scale positioning, which, in turn, considers its liquidity and depth. These are key traits that investors are looking for a true world safe shelter.
“Yes, yes, the basis helps the authority – but it hinders the scale,” Brill said.
Other factors include Singapore’s export economy. Figures from the World Bank shows consisting of exports 178.8% GDP city-state In 2024.
Thus, the monetary organ of Singapore may not have appetite so that the SHD is too much appreciated, according to Trinin Nguyen, senior economist Natixis Corporate & Investment Banking.
“If investors buy too many SGD assets that push the SGD,” Nguyen said, adding that “if the SGD becomes uncompetitive … MAS will not allow it to see as a harder for Singapore’s competitiveness.”
SGD can be used to mitigate the currency risk. Jean Chia, Chief Investment CEO in Singapore, said the SGD could play “a very important role in diversification … Therefore, this can become the third currency in many currency diversification discussions.”
Experts have agreed that Singapore’s currency has the potential for gradual acquisition of the equivalent Swiss franc, if not it or a green lapel.
Jen-Ay Chua, Asia research analyst at Julius Bayer, said it does not rule out that SGD may develop from the Asian safe shelter to a global safe shelter, but it may take time.
Brill VP Bank noted that the status of a safe asylum has been built for decades of crisis and response behavior, and although SGD has been well performed during Asian downs, this is not the first call port during global slows.
“Over time, more international use, more affordable local markets and consistent stability can gradually change,” Brill said.
Slim Pinebridge also optimistically assesses the SGD’s future at a time when the appeal of the traditional safe shelter has taken: “The world is increasingly looking for safe shelter, and I would expect the SGD at the top of this list … Although it may not become what traditionally were USD and JPY, it will be increasingly considered as CHF ASIA.”
