The Singapore dollar (SGD) is the official currency of the Republic of Singapore. Also known as the Sing dollar, it was first issued in 1967 when Singapore gained independence from Malaysia. Since then, the SGD has become one of the most stable and trusted currencies in Asia.

For forex traders, the Singapore dollar offers a compelling opportunity despite the city-state’s small size. As a major financial hub and popular tourist destination, Singapore has an open economy that is heavily dependent on exports. This means the SGD tends to be sensitive to global economic trends.

In this comprehensive guide, we will explore key aspects of the SGD including its history, exchange rate policy, factors that impact its valuation, and trading strategies. Whether you are a veteran forex trader or just starting out, read on to gain valuable insights into the dynamics that influence the Singapore dollar.

A Brief History of the Singapore Dollar

After gaining independence in 1965, the new government of Singapore faced the challenge of establishing a national currency. At the time, currencies of neighboring Malaysia and Brunei were circulating in the city-state.

To address this, the Board of Commissioners of Currency Singapore (BCCS) was established in 1967. The BCCS introduced the Singapore dollar, replacing the Malaya and British Borneo dollar at par value.

Initially, the SGD was pegged to the British pound sterling at a rate of S$60 = £7. This reflected Singapore’s status as a former British colony and the importance of trade with the UK.

However, with the decline of the pound over the 1970s, a new peg had to be found. In 1973, Singapore shifted to peg the SGD against an undisclosed trade-weighted basket of international currencies.

Over the next two decades, the SGD appreciated in line with Singapore’s rapid economic growth and low inflation rates. By the mid-1980s, the Singapore authorities began to gradually loosen the SGD’s peg to increase flexibility.

In 1981, Singapore became a founding member of the Asian Dollar Market. This allowed Asian currencies to be held in bank accounts and supported regional trade and investment.

Finally, in 2005 the Monetary Authority of Singapore (MAS) shifted to a managed float regime based on a Policy Band. The SGD was allowed to fluctuate within an undisclosed policy band, rather than a fixed rate. This arrangement continues until today.

Exchange Rate Policy and Interventions

Unlike most nations, Singapore does not have an independent central bank. Instead, the Monetary Authority of Singapore (MAS) conducts a unified set of policies related to money supply, exchange rates, banking regulation and financial supervision.

The primary goal of the MAS is to ensure medium-term price stability as a foundation for sustainable economic growth. It aims to do this while also developing Singapore’s financial services industry.

Specifically, the MAS manages the SGD exchange rate against a secret trade-weighted basket of currencies. It does so by buying and selling Singapore dollars to prevent excessive appreciation or depreciation. The MAS discloses little information about the composition and weightings of the currencies in this nominal effective exchange rate (S$NEER) basket.

If inflation threatens to accelerate, the MAS can choose to slightly appreciate the SGD. This makes foreign imports cheaper and reduces domestic inflationary pressure. The reverse is also true – a weakening SGD stimulates growth during periods of economic weakness.

While the exact mechanics are opaque, the MAS seems to target the S$NEER operating band around the level consistent with fundamentals over the medium term. It maintains the SGD within this estimated equilibrium band, rather than strictly fixing the exchange rate.

Factors That Influence the Singapore Dollar

As a managed float, the SGD is primarily influenced by domestic monetary policy enacted by the MAS. However, since Singapore is an extremely open economy, external factors also impact the currency’s valuation.

Here are some of the key drivers of the Singapore dollar exchange rate:

Relative Interest Rates: As a center for global finance, interest rates and yields in Singapore can influence capital flows. Higher relative interest rates tend to attract foreign capital, driving up demand for SGD.

Inflation Differentials: Due to its managed float, higher inflation tends to lead to SGD depreciation, and lower inflation causes appreciation. Traders watch Singapore’s inflation rate compared to its major trading partners.

Economic Growth: Robust GDP growth in Singapore implies a stronger currency over the long run. However, rapid growth can also increase inflation, leading the MAS to weaken the SGD to prevent overheating.

Commodity Prices: As a commodity trade and processing hub, Singapore’s economy is exposed to global commodity cycles. Higher oil, natural gas, and metals prices stimulate export revenue and GDP growth, supporting the SGD.

Trade Flows: Singapore runs consistent trade surpluses with advanced economies like the US and emerging markets. Stronger demand for exports increases SGD valuation over time. However, a shift towards protectionism and reduced global trade can undermine the SGD.

Market Risk Sentiment: As a risk-sensitive currency, the SGD weakens during bouts of financial market instability or risk aversion. In times of crisis, safe haven assets are preferred.

China’s Economy: China is Singapore’s largest trading partner, so China’s economic health impacts manufacturing exports and port traffic. Weaker Chinese growth and investment tends to weigh on the SGD.

Regional Outlook: Singapore has close trade and financial ties with its Southeast Asian neighbors. Financial instability or slowdowns in the region can produce SGD weakness.

Trading the Singapore Dollar

The SGD’s characteristics make it an attractive trading vehicle for investors with a view on the economic health of Asia and the global economy. Here we explore popular strategies to trade the Singapore dollar.

Range Trading: With the SGD kept within a policy band, range trading tactics work well. Traders aim to buy near support and sell at resistance based on technical levels. However, range limits can shift based on MAS policy so flexibility is key.

Trend Following: Singapore’s reliance on external trade means the SGD trends for sustained periods based on global macro conditions. Traders can exploit longer term trends using moving averages and breakouts.

Carry Trades: The SGD is a popular funding currency for carry trades. Traders borrow SGD at lower yields and invest proceeds in higher yielding currencies and assets. This is profitable when SGD funding costs are stable.

Risk Barometer: Strong SGD appreciation indicates bullish risk appetite, while weakness reflects fears of instability or downturn. Traders watch SGD as a gauge of overall market sentiment, even in unrelated assets.

Divergence Trading: Sometimes SGD direction diverges from what economic fundamentals imply it should be. Savvy traders can exploit these distortions as the MAS gradually corrects towards equilibrium.

Intervention Fades: When MAS activity heavily distorts prices, traders may bet on a reversion to fair value after intervention subsides, using options structures for defined risk.

Correlations: SGD direction often correlates strongly with commodities, Chinese assets, regional currencies and risk barometers. Trading based on macro correlations can be profitable.

MAS Policy Changes: MAS policy adjustments to the SGD band and slope have major impacts. Positioning ahead of meetings and signals can produce outsized returns around these events.

The Outlook Ahead

As we look forward, the SGD is likely to remain highly influenced by both domestic considerations and external developments. Here are some of the key factors to watch that could impact the Singapore dollar outlook:

  • Monetary policy divergence: As major central banks start winding down pandemic-era stimulus, relative interest rate differentials could reassert influence on the SGD.
  • China slowdown risks: With China a key trading partner, an economic slowdown or financial contagion from Chinese companies and banks would likely spur SGD weakness.
  • Supply chain shifts: Ongoing supply chain adaptations in Asia could impact trade flows and manufacturing exports from Singapore, altering SGD valuation.
  • Energy prices: As a key oil refining and commodity entrepot, Singapore’s economy is exposed to gyrations in global energy prices which could stoke inflation and impact the SGD.
  • Regional stability: Geopolitical issues in South China Sea, Taiwan tensions, Korean peninsula uncertainty, and ASEAN instability all represent threats to regional stability that could undermine the SGD.
  • Tourism reopening: Singapore is gradually easing travel restrictions but the return of tourism and business travel flows will be key for certain services sectors to power SGD gains.
  • Technological shifts: As a tech and R&D hub, Singapore’s economy could see structural impacts from technology adaptations across sectors. This cloud complicates MAS efforts to set policy.

While risks remain, Singapore’s sound economic fundamentals and the MAS’s steady hand should provide anchoring for the SGD. But as always, traders need to keep an eye on all macro developments both within the island nation and worldwide.


The Singapore dollar has come a long way from its beginnings in 1967 as the currency of a tiny island nation with no natural resources. Prudent policymaking and economic planning have transformed the SGD into a global reserve currency that enjoys substantial trust and demand.

However, the future journey of the SGD will continue to be strongly linked with how well Singapore navigates global headwinds and adapts to maintain its competitive edge. For currency traders, these dynamics ensure the SGD will remain a vehicle offering solid returns for those with an informed perspective on Singapore’s economic trends.

By understanding the drivers that influence the SGD’s valuation and using appropriate strategies, forex traders can take advantage of the opportunities this unique Asia-Pacific currency presents. Traders should stay up to date on policy shifts, regional developments and macro conditions to profit from Singapore dollar trades over the long run.