Towards the implementation of an interest rate hike by the FOMC on Thursday, the dollar is expected to strengthen again against a number of other currencies.
However, Goldman Sachs Group Inc, Citigroup Inc and MUFG Bank Ltd unanimously said the Singapore dollar (SGD) is the most resilient in the Asian region this year.
This is because the high inflation rate forced the Monetary Authority of Singapore (MAS) to implement aggressive policy tightening, leading to a strengthening of the SGD.
In comparison, although all currencies retreated with the strengthening of the dollar, the SGD was seen as one of the most competitive, depreciating only 4% against the greenback this year.
According to Jeff Ng from MUFG Bank in Singapore, MAS's call for a 50% policy tightening next month is expected to benefit the SGD despite the Federal Reserve's (Fed) interest rate hike.
Based on these factors, MUFG also predicts that the SGD will increase by 1.38 against the dollar by the end of this year.
Generally, MAS differs from other central banks in that it responds to rising inflation by guiding the SGD above a number of its major trading partner currencies.
MAS focuses more on the nominal effective exchange rate level of SGD (S$NEER) in its policy movements.
Following that, MAS is expected to continue tightening policy in controlling the highest inflation rate in 14 years which indirectly also benefits the SGD to remain resilient in a number of other Asian currencies compared to the dollar.
