Birds of a feather: The SGD is in the same sinking ship as the struggling RMB, analysts warn

Analysts are bearish on both currencies.

The weak Chinese renminbi is feared to drag the Singapore dollar down this year, according to a report by BMI Research.

The report noted that there’s no end in sight to the SGD’s weakness against the greenback. The SGD has lost 6.9% against the US dollar since the beginning of the year, and BMI warned that this is just the beginning of a long and painful downturn.

“[The SGD’s] downtrend is showing few signs of abating amid the city-state's difficult economic outlook and an increasingly dovish central bank. Given the CNY's prominent position in the SGD's trade-weighted basket, the CNY is bound to bring the SGD down with it, and we retain our bearish outlook on both currencies,” BMI Research said.

Other culprits behind the SGD’s weakness are the persistently soft consumer prices and the continued contraction in manufacturing and exports.

“The Monetary Authority of Singapore (MAS) is likely to once again ease its Singapore dollar policy at its bi-annual meeting in April. Given the fact that the SGD's nominal effective exchange rate has traded below the MAS's midpoint for an extended period of time, the central bank is increasingly likely to opt for a re-centering of the band lower, which would result in a one-off depreciation of the currency,” said the report.