The Singapore dollar (SGD) hit an all-time high against the Malaysian ringgit (MYR) yesterday (24 May), rising all the way up to RM3.2060 for the first time. This development is said to be led by Singapore’s more aggressive monetary policy, as well as the SGD’s increase in strength. 

The SGD has been gaining against the MYR for the past few weeks, reaching RM3.1964 on Monday – which breached the previous all-time high mark – and then subsequently RM3.1993 yesterday evening. It eventually blew past RM3.20 when the exchange rate closed.

In discussing the SGD’s rise against the MYR, several experts attributed the situation to the different monetary policies adopted by the central banks of both countries. Specifically, the Monetary Authority of Singapore (MAS) is noted to have pursued a more aggressive monetary policy as compared to Bank Negara Malaysia (BNM). 

For instance, MAS increased the rate of appreciation of its exchange-rate based policy band last October, before raising it even further in January and April. These decisions allowed the SGD to appreciate faster and at a higher level. Meanwhile, Malaysia had kept its interest rate generally stable, although there was a recent hike in its benchmark lending rate by 25 basis points. 

“This policy divergence is benefiting the Singapore dollar,” said the currency strategist at the Bank of Singapore, Sim Moh Siong, who added that the SGD is expected to remain strong in the near term, though the MYR may catch up in the following six to twelve months. “By then, the rate hike by the Malaysia central bank will move into higher gear,” he also stated.

Similarly, both the head of FX Research at Maybank in Singapore, Saktiandi Supaat, and senior currency analyst at MUFG Bank, Jeff Ng, also agreed that MAS’ appreciation policy for the exchange rate has contributed to the strength of the Singapore dollar. 

Meanwhile, the head of FX analysis at forex services firm MonFX, Simon Harvey added that recent news of the United States considering tariff cuts on Chinese goods also played an indirect role in bolstering the strength of the SGD. President Joe Biden’s announcement had helped to lift the Chinese yuan (CNY), and with the CNY holding the largest share in Singapore’s S$NEER (Singapore dollar nominal effective exchange rate) basket, this caused the SGD to rally as well.

Consequently, Harvey said that the SGD also rose against other currencies aside from the MYR, including the US dollar (USD), Hong Kong dollar (HKD), and Japanese yen (JPY).

(Sources: Channel News Asia, The Edge Markets [1, 2, 3]) 

• TAGS:
• Bank Negara Malaysia
• Chinese Yuan
• Foreign Exchange
• Jeff Ng
• Malaysian Ringgit
• Maybank Singapore
• Monetary Authority of Singapore
• MonFX
• MUFG Bank
• MYR
• Ringgit Malaysia
• Saktiandi Supaat
• SGD
• Simon Harvey
• Singapore Dollar