In a world where most currencies have stumbled in the face of the strengthening U.S. dollar, one currency has held its ground — and even flourished: the Singapore dollar (SGD). From 2021 to 2023, as currencies like the Japanese yen, euro, and several Southeast Asian currencies declined, the SGD remained remarkably resilient. But what makes this small city-state’s currency so stable, and even strong, in the face of global volatility?
A Global Backdrop of Currency Weakness
Over the past few years, global financial markets have witnessed a dominant U.S. dollar. The Federal Reserve’s aggressive interest rate hikes to combat inflation led to a surge in the greenback’s value. The Japanese yen tumbled to multi-decade lows. Even the euro — often considered a bedrock currency — fell below parity with the dollar in 2022, the first time in 20 years. Emerging market currencies such as the Malaysian ringgit, Indonesian rupiah, and Philippine peso were not spared, each losing value as capital fled to the dollar for safety and higher returns.
Yet, amidst this global currency shake-up, the Singapore dollar held firm.
The Long-Term Rise of the Singapore Dollar
Singapore’s currency isn’t just resilient in recent years — it has demonstrated long-term strength. Let’s look at some data:
- Against the Malaysian ringgit: In the late 1990s, 1 SGD was worth about 2 MYR. Today, it buys around 3.4 MYR — a near 70% rise over two decades.
- Against the U.S. dollar: In 1997, 1 USD could buy around 1.70 SGD. As of 2023, that number has fallen to about 1.35 SGD — a 20% appreciation of the SGD versus the USD.
This remarkable performance has earned the SGD a reputation as one of the most stable and best-managed currencies globally.
Why Is the SGD So Resilient?
1. Singapore’s Strong Economic Fundamentals
At its core, a strong currency reflects a strong economy. Singapore’s economic model — built on openness, efficiency, and innovation — has ensured low inflation, high productivity, and robust trade surpluses. The country consistently runs current account surpluses (exports exceeding imports), which means more demand for SGD from foreign buyers. It also boasts one of the world’s highest credit ratings, low levels of public debt, and a reputation for excellent governance.
2. A Unique Monetary Policy Regime: Managed Exchange Rate
Most countries control inflation through interest rate adjustments. Not Singapore. The Monetary Authority of Singapore (MAS), the country’s central bank, uses the exchange rate — not interest rates — as its primary tool of monetary policy.
MAS manages the Singapore dollar’s value against a basket of currencies (known as the S$NEER, or Singapore Dollar Nominal Effective Exchange Rate). This basket includes currencies like the USD, CNY, MYR, EUR, and JPY — based on Singapore’s trade links. MAS doesn’t publish the exact composition or the target band, but it adjusts the slope, center, or width of the band to control appreciation or depreciation.
For example:
- When inflation rises, MAS steepens the slope to allow for faster SGD appreciation, making imports cheaper and cooling inflation.
- In downturns, MAS flattens the slope or lowers the band, allowing SGD to weaken and support exports.
This system allows MAS to directly manage inflation in a country where almost everything — from food to fuel — is imported.
3. Stability During Crisis: A Proven Record
History shows that the SGD weathers crises better than most regional currencies:
- 1997–1998 Asian Financial Crisis: While currencies like the Thai baht and Indonesian rupiah crashed by 40–80%, the SGD fell by just ~20%.
- 2008 Global Financial Crisis: MAS flattened the SGD’s appreciation to support growth and returned to a gradual appreciation once the economy recovered.
- COVID-19 Pandemic & 2022 Inflation Shock: MAS took proactive steps, tightening the currency’s path to counter imported inflation, unlike many peers who hesitated.
The result? SGD has become known as a regional safe-haven currency — comparable to the Japanese yen or Swiss franc.
4. Interest Rates that Move with Global Markets
Because MAS does not actively set interest rates, Singapore’s short-term rates (like SIBOR or SORA) are market-driven and tend to mirror U.S. interest rates. Why is that good?
When the U.S. Federal Reserve hikes interest rates — as it did in 2022 with an aggressive 425 basis point rise — capital usually flows out of countries with lower interest rates. That puts pressure on their currencies. But in Singapore, market rates naturally rise with U.S. rates, minimizing capital flight.
In 2022:
- Ringgit depreciated ~10% against USD
- SGD remained flat to slightly stronger
This dynamic helped keep inflation in check and preserved investor confidence in Singapore.
5. Massive Foreign Reserves and Credibility
Singapore holds over USD 300 billion in official foreign reserves — more than sufficient to defend the SGD if necessary. MAS rarely needs to intervene aggressively because its credibility is so strong that markets rarely challenge its exchange rate policy.
6. Investor Trust and Global Perception
Increasingly, international investors are parking money in Singapore for safety. The city-state is seen as politically stable, economically sound, and globally connected. During global turmoil — from the Russia-Ukraine war to U.S. debt ceiling tensions — the SGD has seen inflows from investors looking to avoid risk.
This growing perception of the SGD as an “Asian safe haven” further boosts its value.
Conclusion: A Currency Built on Strategy and Discipline
The Singapore dollar didn’t get here by accident. Its strength is the product of:
- Smart and adaptive monetary policy
- Long-term economic planning
- Investor confidence
- Strategic use of exchange rate management over traditional interest rate tools
In a region where many currencies have suffered from volatility, inflation, and capital outflows, the SGD stands out — not just for its strength, but for the trust it inspires.
As the global economy continues to shift, one thing remains clear: Singapore’s disciplined approach to currency management has made the SGD a quiet powerhouse in global finance.
And that’s why, in the noisy world of currency markets, the Singapore dollar speaks volumes — without saying much at all.