Chart of the Day: Singapore dollar set to outperform the greenback

But it will still be hampered by the RMB.

The Singapore dollar's strong rally over recent weeks means that it is likely to outperform the greenback in total return terms, according to a report by BMI Research.

"The Singapore dollar has staged a strong rally over recent weeks, and together with our global financial markets team's expectations for continued emerging market FX outperformance over the coming quarters, we have deemed fit to upgrade our end-year forecast on the currency to SGD1.4000/USD, versus SGD1.5000/USD previously," BMI Research said.

"In this environment, we believe that EM currencies should outperform the US dollar in total return terms, which suggests that expectations for aggressive Singapore dollar weakness are no longer warranted," the report added.

However, the SGD will continue to be hampered by weakness in the Chinese yuan, which did not experience the wide-scale emerging markets FX sell-off over the past two years and continues to face downside pressures.

“For this reason, we have opted to shift to a neutral stance on the SGD rather than an outright bullish one. Given that we maintain our expectations for a wide range of macroeconomic and financial market factors to weigh on the Chinese yuan, it is unlikely that we will see sustained strength in the Singapore dollar over the course of this year,” said the report.