SINGAPORE, 8 May 2025 – The Singapore dollar (SGD) has been on a strengthening trajectory against the US dollar (USD) in recent years. This trend has sparked discussions about the possibility of the SGD reaching parity with the USD. In this article, we delve into the factors influencing the SGD’s appreciation, analyze historical exchange rate trends, and assess the likelihood of achieving parity.(CNA)
Historical Exchange Rate Trends
In 2025, the SGD has shown notable strength against the USD. As of May 7, 2025, the exchange rate stood at 1 USD = 1.2943 SGD, marking a significant appreciation from earlier in the year. The lowest exchange rate recorded was 1 USD = 1.2890 SGD on May 6, 2025 . The average exchange rate for 2025 so far is approximately 1 USD = 1.3392 SGD .(Most Accurate Exchange Rates, Most Accurate Exchange Rates)
This strengthening trend reflects the SGD’s resilience and the underlying economic factors supporting its value.
Economic Factors Supporting SGD Strength
Robust Current Account Surpluses
Singapore consistently runs substantial current account surpluses, indicating that the nation exports more goods, services, and capital than it imports. This surplus contributes to the demand for SGD, supporting its appreciation against other currencies.(CNA)
Capital Inflows and Financial Hub Status
As a global financial center, Singapore attracts significant capital inflows. Investors view Singapore as a stable and business-friendly environment, leading to increased demand for SGD-denominated assets. This demand further bolsters the currency’s strength.(CNA)
Monetary Authority of Singapore (MAS) Policy
The MAS manages monetary policy through exchange rate targeting rather than interest rates. By allowing the SGD to appreciate gradually within a policy band, the MAS aims to maintain price stability and support economic growth. This approach has contributed to the SGD’s steady appreciation over time.(Financial Times)
Expert Opinions on Parity Prospects
Mansoor Mohi-uddin, Chief Economist at Bank of Singapore, suggests that the SGD could reach parity with the USD within our lifetimes. He draws parallels with the Swiss franc, which achieved parity with the USD after the 2008 financial crisis. Both Switzerland and Singapore are small, open economies with strong financial sectors, attracting capital inflows that support currency appreciation .(CNA)
While a sudden global USD crisis could accelerate the SGD’s path to parity, Mohi-uddin believes it’s more likely to occur gradually, driven by Singapore’s continued economic strength and capital inflows.
Potential Challenges and Risks
MAS Intervention
The MAS may intervene to prevent excessive SGD appreciation that could harm export competitiveness. Such interventions could slow the pace toward parity.(CNA)
Global Economic Uncertainties
Trade tensions, geopolitical risks, and shifts in global economic conditions could impact capital flows and exchange rates, influencing the SGD’s trajectory.
Inflation and Domestic Economic Performance
Domestic inflation rates and economic performance play roles in exchange rate dynamics. Lower inflation and robust economic growth support currency strength, while the opposite could hinder appreciation.
Conclusion
The SGD’s appreciation against the USD in 2025 reflects Singapore’s strong economic fundamentals, consistent current account surpluses, and status as a global financial hub. While reaching parity with the USD is not imminent, the trajectory suggests it’s a possibility in the foreseeable future, barring significant economic disruptions.
Investors and policymakers should monitor ongoing economic indicators, MAS policies, and global financial developments to assess the SGD’s path toward potential parity with the USD.(CNA)
Note: This article is based on data and expert opinions available as of May 8, 2025.