Here's how the greenback's rally will affect the weakening SGD

Asian currencies will continue to depreciate.

The Singapore dollar will continue to lose ground against the US dollar in coming months, but its depreciation will not be as pronounced as compared to other struggling Asian currencies.

A report by BMI Research showed that Asian currencies have depreciated against the US dollar by an average of 0.7% in the last month of 2016 on back of a broad-based rally in the US dollar as the US Federal Reserve signalled a more hawkish monetary policy.

“In 2017, Asia will face significant external uncertainty, which will be broadly negative for Asian FX. This is with respect to a more protectionist approach by the Trump administration and slowing growth in China, where the government is facing policy constraints as it seeks to strike a balance between ensuring economic growth and controlling a buildup of financial risks,” BMI Researchsaid

The report noted that the Singapore dollar depreciated by 0.8% in the previous month to SGD1.44/USD. BMI Research holds a largely neutral outlook for the currency over the long-term.

“On one hand, the continued depreciation of the Chinese yuan will place downside pressure on SGD, but on the other, fundamental strengths such as low inflation and a strong net international investment position will be positive for the currency,” BMI Research said.