Singapore dollar to average slightly stronger in 2022 at S$1.3400/USD

The previous projection was at S$1.3600/US$.

The Singapore dollar is expected to slightly strengthen versus the US dollar in 2022.

In its latest outlook report, Fitch Solutions revised its 2022 projection for the Singapore dollar to S$1.3400/US$ from S$1.3600/US$ previously.

The analysts said the change in their forecast is due to the expected further tightening of Singapore’s monetary policy in 2022 and a more stable COVID-19 situation which will likely boost investor confidence.

“The MAS has re-applied a slight upward slope in managing the S$NEER policy band since 14 October, after maintaining a flat trajectory since April 2020 to help the economy cope with the effects of the pandemic by maintaining a competitive Singapore dollar, key to the country’s external sector,” Fitch Solutions said.

Potential gains however will be capped by “unfavourable growth and inflation differentials against the US.”

The growth forecast for Singapore was projected at 3.6% in 2022, whilst the US was at 3.7%. The inflation forecast for Singapore was also slightly higher at 2.3% versus 2.2% for the US.

“This means that from a yield perspective, the SGD is likely to be slightly less attractive than the US over the coming year, capping any appreciatory potential,” Fitch Solutions said.

For 2021, Fitch Solutions also slightly revised its forecast to S$1.3450/US$ from the previous S$1.3500/US$.

Analysts said they are expecting SGD to continue “testing the stronger bound” of the trading range between S$1.3400/US$ and S$1.3800/ USD through the end of 2021 and early 2022, “though a sustained breach of this level is unlikely.”