The Singdollar is more likely to be on the track and continues to strengthen most importantly against the Chinese currency. At the time of writing this article, the SGD stood at $1.3715 to the USD, which shows a slight weakening from the $1.3651. Some experts anticipate it to reach $1.35 by early next year.
Peter Chia, United Overseas Bank FX strategist said that the decline of USD/SGD has coincided with the broader USD weakness in the same period of time. It is also visible that the SGD is very tightly correlated with the CNY against the USD and because of that, the USD/SGD is also vulnerable to the fluctuations and volatility that will take place because of the US-China relationship. He expects the USD/SGD to be 1.37 in Q320.
Also, the experts from the private banking economist believe that they expect a stronger SGD and the process to continue for quite a long time, and it is also anticipated to be the new norm for the next few months. The fact that the local currency is keeping itself stable, the reason for that was mentioned to be the fact that it was managed in a basket of currencies that have all strengthened against the USD, in particular, the Chinese currency. The economic conditions of Singapore remain under uncertain forex markets, it is a visible trend that Asian economists are finding the solution to the economic crisis than was anticipated. We cannot say that the foreign exchange market was affected by the current circumstances as the demand for Forex brokers in Singapore was quite notable. However, this is not a surprise either, since it was the general trend all over the world during the global covid pandemic, as people were trying to find an alternative source of income during the financial crisis.
The big picture of the Chinese economy is looking better today than it was six months ago. The country has only a few covid cases and they are imported and the domestic conditions are getting on the track. Although, the US-China tension still remains worrisome. The rebound percent of the Chinese economy is expected to be from 3 to 6 percent after a 6.8 percent contraction in Q1, which was the highest GDP decline since 1992.
To consider the same number in the case of the US, the GDP number dropped by 32.9 percent in Q2, which was the worst among other quarters. The federal government has already warned people that the economy will continue to remain unstable for some time and during this global financial crisis, all central banks are acting as lenders. Many skeptics say that perhaps, the US dollar is showing the real US economy and that there is no V-shaped recovery expected.
Singapore and SGD were able to stay stable during this uncertain time because of their strong fiscal reserves and the moves to utilize them swiftly and effectively. This created a very effective base for the currency to strengthen while simultaneously the USD was weakening. In the longer term, for example over the one fiscal year, financial experts and economists are expecting the global economic situation to be way more normalized and get over the Covid 19 situation since vaccination is also giving the reasons for the positive anticipation. The global growth is also expected to be on the uptick and this situation will work out in favor of the other Asian currencies, that are walking along with the USD.
The economic fight against the covid pandemic appeared to be even worse than it was expected to be since there were several outbreaks in many different countries and the businesses were unable to start operating on the market nonstop. The key factors that are working on accelerating the sell-off in the USD are the massive Federal Reserve Easing, as well as further deterioration in US debt in the form of a much higher US debt-to-GDP ratio.