A staff member counted the Singapore dollar currency notes at the Raflles Place Financial Business District in Singapore on 6 October 2022.
Rosalan Rahman | AFP | Getty images
At the time of uncertainty, investors turn to safe-heaven assets-gold, tragedies as well as currencies such as Japanese Yen, US Dollar and Swiss Frank. These assets are expected to maintain or increase their value during the period of market disturbance.
While the greenback remains the reserved currency of the world’s choice, it is weakening. The dollar index has exceeded 9% to date. The approach to the Japanese yen is cloudy with business concerns. Against such a background, analysts suggest that there may be an option in making: Singapore Dollar.
OCBC FX strategist Christopher Wong told CNBC that SGD already acts like “Quasi Safe-Haven” currency, especially within Asia and emerging markets.
“While it is not a global status similar to a traditional safe haven like USD, JPY [Japanese yen] Or chf [Swiss franc]SGD performs defensive characteristics during episodes of financial stress – especially concentrated in Asia. “Wong said.
SGD is getting stronger against dollar, with Jefferies being getting about 6% years till date Allegedly It was estimated that the currency could reach equality with the dollar over the next five years.
According to Omar Slim, the co-head of Asia in Pinebridge Investments, “SGD is actually one of the world’s safe havens, but it may not be a ‘next safe shelter’.”
He said, “This is a safe shelter site, the institutional structure of Singapore, the solid and flexible economic foundation of Singapore, along with a strong policy, especially when it comes to fiscal discretion,” he said.
VP Bank’s Chief Investment Officer Felix Brill agrees that SGD has several features of a modern safe shelter, including macroeconomic stability, strong institutions, a large current account surplus and low political risk.
Bry said that the monetary policy structure of Singapore has provided the currency “extraordinary stability”, which is actually looking for a safe shelter flow.
Unlike most countries, Singapore does not use interest rates to manage its currency, but rather strengthen or weakens the Singapore dollar against a basket of its main trading partners in a policy band. The exact exchange rate is not fixed, but the SGD set can go within the policy band, which has not been disclosed to the exact level.
Jeff NG, head of the Asia macro strategy at Sumitomo Mitsui Banking Corporation, estimates that the policy band is 4%, and that this management of SGD means that there is limited instability, which gives less risk and more certainty in short term.
Hurdles
While SGD is on the right path, experts stated that there were some obstacles to become the next widely accepted global safe-currency.
The first SGD is the market size. data from Bank of International Settlements in 2022 It was discovered that the USD created 88% of the Forex market, while Yen and Swiss Frank made 17% and 5% respectively. Singapore dollars made just 2%. The BIS survey is conducted every three years, next to September 2025.
“Although Singapore is highly respected, it has a small economy, and SGD does not have a depth of Yen or Frank’s trading volume or bond market,” said Bryl of VP Bank.
In addition, Singapore’s monetary policy has provided extraordinary stability for SGDs, it is a great thing that disrupts it.
Bryl explains that the currency is “managed”, it limits the speculation of markets and massive positions, which in turn cap. These are the main symptoms that investors see in a true global safe shelter.
“So yes, the framework helps in reliability – but obstructs the scale,” Bry said.
Other factors include Singapore’s Export-Reticic Economy. World Bank figures show that exports become 178.8% of the gross domestic product of city-state In 2024.
For example, the Monet Authority of Singapore may not be hunger to appreciate a lot for SGD, according to Trinh Nguyen, senior economist of Natixis Corporate and Investment Banking.
“Should investors purchase too much SGD property, which will push the SGD,” said, “if SGD becomes unpredictable … then MAS will not tolerate that it looks as harmful to Singapore’s competition.”
SGD can be used to reduce currency risk. Jean Chia, a global chief investment officer at Bank of Singapore, said that SGD “can play a very important role in terms of diversification … so it can be the third currency in many of your currency diversification discussions.”
Experts agreed that Singapore’s currency gradually has the ability to achieve an equal position to Swiss Frank if not yen or greenback.
Research analyst for Asia at Julius Bayer, Zen-Ai Chua said she does not deny the possibility that SGD Asian safe shelter may develop in a global safe shelter, but it may take time.
VP Bank’s brill reported that the condition of safe shelter has been created in decades of crisis-reaction behavior for decades, and while SGD has performed well during the Asian recession, it is not yet the first port of the call during the global recession.
“Over time, more and more international use, more accessible local market, and frequent stability can gradually change,” Bry said.
Pinebridge’s slim is also optimistic about the future of SGD, when traditional safe haven appeals a hit: “The world is looking for a rapidly secured hat, and I hope SGD will be at the top of that list … while it cannot be seen what the USD and JPY can not be traditionally seen, which will be seen as ASIA’s Chf, which will be seen as ASIA”.
