Chart of the Day: Here’s why the SGD is Asia’s second-worst performing currency

Negative inflation, slowing growth are to blame.

This chart from DBS shows that the Singapore dollar is Asia’s second-worst performing currency against the greenback.

Over the past one month, the SGD has depreciated by about 2.6% against the US dollar. The region’s worst-performing currency is the Korean Won, which has depreciated by about 4.4%.

According to DBS, negative inflation and slowing growth momentum have weighed on the SGD.

“Apart from a broad-based USD strength worldwide on the back of the Fed hike expectation, the SGD has been weighed down by weak domestic economic conditions. Inflation has been stuck in the negative territory for the past seven months while core inflation will likely dip into the red soon. In addition, growth momentum has reversed drastically,” DBS said.

“Indeed, the Monetary of Singapore (MAS) has indicated yesterday that the government will lower its full year GDP growth forecast soon from its current 2-4% range. With the falling inflation and growth, the SGD nominal effective exchange rate has eased to the lower half of the policy band. Regardless of whether the MAS will ease monetary policy further in October, the SGD will likely continue to be weighed down by Fed hike expectation and deteriorating domestic economic conditions. We expect the SGD to register 1.42 against the USD by mid-2016,” DBS added.