Singapore Dollar’s Ascent: Is Parity with the US Dollar on the Horizon?

A Report by CYS Global Remit Counterparty Sales & Alliance Unit 

In 2025, the Singapore dollar (SGD) has shown impressive strength, appreciating roughly 5.8% against the US dollar (USD) year-to-date. Currently trading around 1.29 against the greenback, the SGD is close to its decade-high of 1.28 reached last year. This remarkable performance is attributed to various factors, including a weakening USD, regional stability, and Singapore’s robust economic fundamentals. 

Christopher Wong, FX strategist at OCBC, highlights the recent USD sell-off as a key driver of SGD’s gains, propelled by optimism about tariff reductions and improved US-China trade relations—factors that have also supported other regional currencies like the Taiwan dollar. 

Adding to this momentum is a global shift toward currency diversification. Saktiandi Supaat, Maybank’s Head of FX Research, notes that investors are increasingly seeking alternatives to the USD, with the SGD being a primary beneficiary due to Singapore’s political stability, sound economic policies, and supportive stance from the Monetary Authority of Singapore (MAS). These conditions make the SGD an attractive safe-haven currency for regional and global investors. 

Strengthening Momentum Short-Term 

The outlook for the SGD remains positive, with analysts predicting further gains in the near term. Maybank expects the USD/SGD exchange rate to reach 1.2800 in Q3 and 1.2650 by the year’s end, aligning with OCBC's forecasts assuming continued tariff stability and manageable impacts from trade policies. 

Driving this optimism is the anticipated softening of the USD. The US Federal Reserve’s dovish stance and possible interest rate cuts could exert downward pressure on the dollar, creating a favorable environment for the SGD’s appreciation. Analysts also cite the decline of US economic "exceptionalism" as another factor reducing the USD's appeal. 

Despite positive signals, experts advise caution. Wong points out that after recent sharp gains, the SGD’s appreciation pace may slow as the market stabilizes, setting the stage for more measured gains in the medium term. 

Parity: A Long-Term Prospect 

The possibility of the SGD reaching parity with the USD—where one SGD equals one USD—has garnered growing attention. Although considered a long-term prospect, some experts view it as attainable. Mansoor Mohi-uddin, chief economist at the Bank of Singapore, draws parallels with the Swiss franc, which reached parity with the USD after the 2008 financial crisis. Both Switzerland and Singapore feature economic characteristics conducive to currency appreciation, including small, open economies and significant capital inflows. 

While a global USD crisis could hasten the SGD’s path to parity, analysts suggest a more gradual trajectory. Singapore’s sustained current account surpluses and continued capital attraction bolster the SGD’s upward path. Mohi-uddin notes that the MAS’s tendency to curb excessive currency strength indicates that parity may take time to achieve. 

Historically, SGD’s rise mirrors broader trends among strong, stable currencies. Its steady appreciation reflects not just Singapore’s economic prowess but also shifting global dynamics, including challenges to the USD’s dominance as the primary reserve currency. 

Potential Risks and Challenges 

Despite the optimistic outlook, analysts caution that potential risks could disrupt the SGD’s progress. Supaat stresses that external shocks, such as trade wars or global economic downturns, could pose significant challenges. While the role of the USD as the world’s reserve currency is increasingly questioned, it remains a powerful stabilizing force, complicating the SGD’s path to parity. 

Wong notes that rising US protectionism and economic uncertainty have undermined confidence in the USD, prompting portfolio diversification. However, these shifts are unlikely to completely replace the greenback in the near term. Instead, they reflect gradual adjustments in global capital flows, indirectly supporting the SGD. Analysts caution against assuming the SGD’s rise is guaranteed, as macroeconomic factors, global trade developments, and policy decisions will ultimately determine its trajectory. Maintaining Singapore’s economic fundamentals and adapting to global changes will be crucial for sustained strength. 

Conclusion 

The steady appreciation of the Singapore dollar highlights the nation’s economic resilience and strategic role as a financial hub. While parity with the USD remains speculative, it underscores Singapore’s growing significance in the global economy. As geopolitical and economic uncertainties increase, the SGD’s stability and reliability position it as a preferred choice for investors. Cautious optimism is necessary; though the path to parity may be challenging, the SGD’s rise is a testament to Singapore’s robust financial infrastructure and adaptability to global shifts. Whether or not parity is achieved, the SGD stands poised as a key player on the international currency stage. 

 Source

https://www.channelnewsasia.com/singapore/singapore-dollar-strength-us-dollar-currencies-fx-5114541