The Singapore dollar, which recently hit a decade-high against the US dollar, could weaken if the US economy avoids a recession.
The Singapore dollar recently traded at around 1.30 against the US dollar, a level not seen since 2014. This marked a significant appreciation from 1.337 at the start of August and 1.358 in early July.
He mentioned that the Federal Reserve Chairman, Jerome Powell, supported the notion of a rate cut during the Jackson Hole Economic Symposium last week.Mr Chia added that it “would not be surprising” if the USD/SGD exchange rate temporarily drops below 1.30 in the near term if US inflation data remains weak, increasing the likelihood of further Fed rate cuts.
Second, the unwinding of carry trades, where investors borrow in currencies with lower interest rates to invest in those with higher rates, has affected the US dollar. As for the ringgit, companies often receive payments in US dollars but may not convert them into Malaysian ringgit.
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