Tags: singapore | dollar

Get Ready For a Comeback of the Singapore Dollar

By Sean Hyman   |   Thursday, 16 Jul 2009 03:19 PM

Singapore’s economy is coming out of its recession after five, back-to-back quarters of contraction.

This recession has been seen as the deepest that the Singapore economy has experienced since 1965. So a rebound out of a recession of this proportion is a huge deal.

What’s helping to turn it around? For starters, there’s been over $2 trillion in stimulus worldwide that has spilled over to Singapore’s export market.

However, the biggest boost to the country’s economy is coming from its manufacturing sector. This one sector accounts for about one quarter of Singapore’s economy.

Its industrial output jumped in the first two months of last quarter. That was some of the first signs of light that I’ve seen there in quite some months now.

I believe this is one of the reasons why the International Monetary Fund (IMF) last week increased its forecast for emerging Asia’s growth in 2009.

On top of all of this, Singapore’s stock market has jumped quite a bit and has sustained a rally on much higher volume (about 50 percent higher, in fact). The Straits Times Index has risen 37.2 percent in the last quarter. That’s the biggest gain it’s had since 1999.

This perk up in their stock market on higher volume is a good sign for their currency. After all, before foreigners can get in on the gains in Singapore’s stocks, they first have to buy Singapore currency in order to buy their stocks, which are denominated in the Singapore dollar (SGD).

I also believe this is why economists from both Citigroup and Goldman Sachs are hopping on the band-wagon and have increased their Singapore economic estimates in recent weeks.

What’s really encouraging to me is that not only are we seeing the slowdown in the decline of Singapore’s exports and the increase in their manufacturing sector, but we’re also seeing rebounds in their technology, construction, financial services, and private housing sectors. Since this recovery appears to be broad, it is very likely that it will be sustainable.

Over here in the United States, we’ve had an overall rebound in our stocks too. However, it’s been on much lighter volume and the recovery to our economy hasn’t been as broad as it has been in Singapore.

This is why I feel that the USD/SGD currency pair (U.S. dollar vs. the Singapore dollar) will turn south again as the Singapore dollar starts to pounce on the greenback once more.

So look for the next downturn in this pair in the coming weeks.

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Singapore’s economy is coming out of its recession after five, back-to-back quarters of contraction.This recession has been seen as the deepest that the Singapore economy has experienced since 1965. So a rebound out of a recession of this proportion is a huge deal. What’s...
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2009-19-16
 

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