The SGD is waging a losing battle over the strong greenback

The currency will head lower in 2016.

The embattled Singapore dollar will weaken further against the greenback in 2016, particularly after the Monetary Authority of Singapore’s (MAS) decision to ease policy last month.

A report by BMI Research highlighted that the Singapore dollar faces a myriad of depreciatory factors over the next 6-24 months, such as lacklustre demand, slowing global growth and continued uncertainty over the US Federal Reserve’s interest rate policy. These factors will cause the SGD to head lower against the US dollar through the end of 2016 despite its strong long-term foundations.

“While the SGD was able to claw back some of its losses versus the US dollar following the MAS's announcement that it would reduce the appreciatory slope rather than re-centre the band lower, it has since re-embarked upon its longer-term depreciatory trend versus the US global reserve currency, once again weakening beyond the SGD1.4000/USD level,” BMI Research said.

“As such, we forecast the unit to end 2016 at SGD1.4800/USD, versus its current spot rate of approximately SGD1.4000/USD. At the same time, the MAS has also adopted an increasingly dovish stance on the Singapore dollar (the central bank utilises the SGD as its main monetary policy tool), easing the unit's appreciatory slope against its trade-weighted basket of currencies in both January (at an unscheduled meeting) and October (at its second bi-annual meeting),” the report added.