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Singapore Dollar Foreign Currency Prediction - Singapore Government Wants Stronger Currency

February 10, 2011 - Written by John Cameron

Singapore’s Central Bank remains concerned about the effects of inflation on the economy, according to the Country’s Deputy Finance Minister Lim Hwee Hua. During a speech earlier today, Hua stated that policy-makers in Singapore are willing to allow the Singapore Dollar to strengthen further to curb the ravaging effects of rising prices on Singaporean savers and those on fixed incomes. This has led to speculation that Singapore will move to tighten monetary policy at its next review in April, which would provide significant support for the Singapore Dollar.

These comments caused some near-term support for the Singapore’s currency in the foreign currency markets. The Singapore Dollar entered into an up-trend against Sterling in the second half of 2010, strengthening from close to 2.16 at the start of August to end the year below the key 2.00 resistance level. However, this key level was rapidly rejected to leave us trading at above 2.05 on the day today.

However, the Singapore Dollar remains vulnerable following the decision earlier this week by The People’s Bank of China to raise interest rates for the second time in a month and a half. This has led analysts to predict further Chinese rate hikes as 2011 in an attempt by policy-makers to dampen inflationary pressures in the emerging super-power. These expectations of a further tightening of Chinese monetary policy have caused a flow of funds away from China’s Asian trading neighbours, including Singapore and analysts predict that currencies including the Hong Kong Dollar, Indian Rupee and the Singapore Dollar will remain susceptible to downside pressures in the months to come.

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