The Singapore Dollar Is Holding Its Ground Against the U.S. Dollar

2 October 2026
The Singapore Dollar Is Holding Its Ground Against the U.S. Dollar

Last week, we examined why prolonged uncertainty in the United States is encouraging investors to diversify beyond U.S. markets. For investors reallocating away from dollar assets, the currency of the destination matters as much as the asset itself.

Why the Singapore Dollar Holds Up

Singapore's resilience begins with its monetary framework. Unlike most central banks, the Monetary Authority of Singapore (MAS) does not steer an interest rate. Instead, it manages the Singapore dollar against a basket of the currencies of Singapore's main trading partners, a measure known as the S$ nominal effective exchange rate, or S$NEER. MAS lets this measure move within a band set to rise gradually over time, and has tightened twice this year (The Edge Singapore, 2026), guiding the currency steadily stronger.

This framework has been in place since 1981, and its consistency is a strength in itself: MAS reviews policy on a set quarterly schedule and adjusts in small, clearly signalled steps, while ample official reserves and AAA ratings from all three major credit rating agencies give the currency a firm foundation. For investors, this means a policy path they can anticipate rather than react to. The S$NEER remains in the upper half of that band, and OCBC expects a further slight tightening at the mid October review.

What the Market Data Shows

The market data bears this out. The Singapore dollar stood at about 1.28 against the U.S. dollar on 28 September, roughly 0.6% stronger than a year earlier, and has held within a narrow range of 1.26 to 1.31 over the past twelve months. While the U.S. Dollar Index rose about 2.4% in the fortnight around the Federal Reserve's September hike, the Singapore dollar weakened by about 1%, less than half the move in the dollar index.

Interest rates tell the same story. Three month SORA, Singapore's benchmark rate, edged up only from 1.19% to 1.23% in September, even as the Fed's hike took U.S. rates to 3.75% to 4.00% (Tribe, 2026). The gap between the two widened in the very month the Fed turned more hawkish, yet investors have so far accepted a discount of more than 2.5 percentage points to hold Singapore dollars, one that bank strategists describe as structural. With markets pricing in three to four further Fed hikes by the end of 2027, whether that discount holds as U.S. rates keep rising is the key test to watch heading into MAS's October statement.

The Gradual Erosion of Dollar Dominance

De-dollarization is a structural trend, although it is unfolding gradually rather than abruptly. According to International Monetary Fund data, the U.S. dollar accounted for approximately 57% of global foreign exchange reserves in the first quarter of 2026, down from roughly 71% at the turn of the century (International Monetary Fund [IMF], 2026). UBS's Chief Investment Office (2026) expects this diversification, and a medium to longer term depreciation trend in the dollar, to remain intact, citing the U.S. fiscal trajectory, trade policy uncertainty and central banks' reserve diversification. The latest U.S. sanctions package, with tariffs of up to 100% that may be imposed or waived at Washington's discretion, only adds to that uncertainty.

The shift extends beyond currencies. After some 15 years in which an overweight to U.S. equities was rewarded almost by default, the U.S. now represents around 72% of global equity benchmarks, while less transparent economic policy may warrant higher risk premiums on U.S. assets. In the near term, UBS anticipated that Middle East tensions and higher oil prices could lend the dollar temporary support, and the U.S. Dollar Index has since recovered to above 101. For long horizon investors, this volatility is itself the challenge.

The Takeaway

The case for Singapore is not a wager against the U.S. dollar, but a recognition that dollar exposure now carries greater policy and currency risk, while the Singapore dollar offers a managed and steadily appreciating alternative. Next week, we turn to the broader picture: how Singapore's regulatory consistency and expanding wealth base are shaping where diversified capital ultimately settles, ahead of the MAS Monetary Policy Statement due by 14 October.

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