Wall Street tells clients Singapore dollar is top trade in Asia

SINGAPORE – Singapore's dollar is emerging as the top bet for Wall Street's biggest banks as wagers the central bank will extend policy tightening bolsters demand for South-east asia's top-performing currency.

Goldman Sachs Group favours the Singapore dollar the most among Asian currencies, along with Thailand's baht. Citigroup recommends buying the currency on dips, while RBC Capital Markets says further policy tightening by the Monetary Authority of Singapore (MAS) – which uses the nation's foreign exchange as its main policy tool – will only turbocharge its gains.

While the relentless greenback strength has clobbered Asian currencies this year, the Singapore dollar has held up relatively well thanks to a hawkish central bank and recovering economic growth. The currency has weakened 3.8 per cent against the US dollar in 2022, but has strengthened against all of its Asian peers with the exception of the Hong Kong dollar, which is pegged to the greenback.

On Thursday, the Singdollar dipped 0.3 per cent to 1.4012 per US dollar.

“We expect the MAS to steepen the SGD nominal effective exchange rate (S$Neer) slope by 50 basis points in October,” Goldman strategists including Danny Suwanapruti wrote in a research note. It “remains our favoured currency in non-Japan Asia,” they said.

The Singapore dollar has outperformed as the MAS sought to curb inflation that's raging at the quickest levels in almost 14 years. The central bank unexpectedly tightened policy last month – its second surprise move this year – to cool price pressures.

While the US dollar is likely to strengthen further and heap pressure on Asian assets, Singapore's currency is one “we are favorably biased towards and prefer to buy the dips lower in S$Neer,” Citigroup strategists including Johanna Chua wrote in a note.