If there’s something Singaporeans are constantly on the lookout for, it’s the exchange rate of the Singaporean dollar (SGD) to the Malaysian Ringgit (RM).
Once there was even a slight increase in the rate, money changers would see long queues of Singaporeans eagerly excited to change their cash.
And now we bring the good news: the SGD has just hit an all-time high against the RM.
Record High Since 1982
On Monday (24 May), the SGD reached a record high of RM3.1964, largely due to strength in the Singdollar, before easing to RM3.1950 later in the day.
The record occurred in the early morning of Monday and later fell slightly. It is said that this is the highest level of the exchange rate since 1982.
So what caused the increase?
Sentiment around China contributed to the greater strength of the SGD. Since news that president Joe Biden was weighing cutting tariffs on Chinese goods, the yuan was lifted to its highest since 5 May.
With the yuan holding the largest share in the Singapore dollar nominal effective exchange rate (S$NEER) basket, the rally in the CNY dragged SGD higher too as currency traders looked to offset the depreciation in the Sing dollar relative to CNY with other currencies, said Simon Harvey, head of FX analysis at MonFX.
This thus saw the SGD strengthen against other major trade partners, including USD (+0.49 per cent), MYR (+0.13 per cent), HKD (+0.47 per cent) and JPY (+0.05 per cent).
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SGD Steadily Rising
The Singapore dollar has been rising against the Malaysian ringgit since late April.
In the week of 25 April, a surge of people were lining up to buy ringgit after the exchange rate rose to 3.17, an increase from 3.10 earlier that month.
The constant rise of SGD against the RM is due to Singapore pursuing a more aggressive monetary policy by appreciating the Singdollar at a faster pace and at a higher level.
The authorities first tightened its policy in October last year when it raised the slope of its exchange-rate based policy band to allow the Singapore dollar to appreciate at a slightly faster pace.
It then followed up with another steepening of the slope in January, surprising markets with an inter-meeting adjustment.
In its half-yearly policy statement in April, the Singapore central bank said it would raise the slope of appreciation “slightly” yet again, while re-centering the mid-point of the policy band “at the prevailing level”.
Malaysia’s central bank has also been keeping its interest rate stable, but raised its benchmark lending rate by 25 basis points — a policy divergence that benefitted the SGD.
Currently, the SGD is expected to remain strong in the short term, though the RM might catch up in the next six to 12 months.
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