SINGAPORE – The Singapore dollar is expected to continue strengthening against regional currencies, including the yen, in 2026, after the central bank surprised markets by tightening monetary policy for the second consecutive time since April.
The Monetary Authority of Singapore said on July 27 that it will increase “very slightly” the rate of appreciation of the Singapore dollar’s trade-weighted value, allowing it to strengthen against an undisclosed basket of currencies.
While a stronger Singdollar would lower import costs and boost Singaporeans’ spending power abroad, it could also increasingly hurt exporters if regional currencies remain weak.
“When we look at our neighbours, many are moving the opposite direction by holding softer currencies to protect their own exports… Whatever room is left for the Singdollar to run will get amplified against that sort of backdrop,” said Zavier Wong, market analyst at eToro.
He added that further policy tightening could not be ruled out, as MAS expects inflation to remain elevated, which could keep the Singdollar strong.
“MAS has always tried to weigh two things against each other here and that is, keeping imported inflation in check versus keeping exports competitive,” he said.
“A persistently strong Singdollar helps the former and hurts the latter – there is no getting both at once.”
While the widening gap between the Singdollar and its regional peers is not yet a major concern, this could still erode Singapore’s price competitiveness over time, as trade effects filter through the economy, said Wong.
Widening Singdollar gap
Oriano Lizza, sales trader at CMC markets, is expecting the Singdollar to remain one of Asia’s strongest currencies over the next 12 months.
But rather than expecting a one-way appreciation story, investors should anticipate more nuanced currency moves, driven by country-specific fundamentals, diverging central bank policies and the global growth outlook, he said.
The Japanese yen is among the regional currencies expected to remain volatile against the Singapore dollar, despite intervention to support the currency by Japan and the US.
Japan’s finance ministry said on Aug 3 that it had carried out a joint intervention with the United States on July 31 to support the yen.
It marked the first coordinated intervention by the two countries since 2011, when they acted together to weaken the currency following the earthquake and tsunami in eastern Japan.
The Japanese yen fell about 5.59 per cent against the Singapore dollar in 2025 and has weakened a further 0.27 per cent year to date in 2026. It was trading around 122 per Singdollar at the time of writing, up 1 per cent in a day.
The yen is expected to remain volatile against the Singapore dollar, noted Jeremy Tan, chief executive of Tiger Fund Management.
He said the yen’s recent appreciation against the Singapore dollar reflected strength in the Japanese currency rather than weakness in the Singdollar, following coordinated intervention by Japanese and US authorities to support the yen.
“Japan has intervened twice this year to defend the currency from continued downward pressure, while keeping interest rates at multi-year highs of 1 per cent. In the near term, we see support for the yen given the two central banks’ concerted intervention efforts,” said Tan.
“Still, in the long-term, Japan continues to face structural growth challenges, persistent budget deficits, and rising government debt…. Higher energy prices could further strain the trade deficit and inflation outlook, adding downward pressure on the yen,” he added.
The Singdollar has also been strengthening against the Indonesian rupiah.
The Indonesian currency slumped 9.2 per cent against the Singdollar in 2025 and has weakened a further 7.7 per cent year to date in 2026, trading at around 14,000 per Singdollar at the time of writing.
Indonesia produces oil but remains a net importer, so higher energy prices amid the fallout from the Iran war have raised import and fuel subsidy costs. This has weakened the archipelago nation’s external trade balance and fiscal position and weighed on its currency.
Global risk aversion has also triggered capital outflows from Indonesia’s bond and equity markets, as investors move funds into safer assets, adding to pressure on the rupiah.
Official data showed that foreign investors sold a net US$202 million (S$259.4 million) in Indonesian government bonds in January.
“There is still scope for moderate Singdollar appreciation if Indonesia experiences softer commodity exports or renewed capital outflows,” said CMC’s Lizza.
The outlook of South Korean won, meanwhile, hinges more on domestic developments.
The won depreciated 3.77 per cent against the Singapore dollar in 2025, but has edged up 0.04 per cent year to date in 2026. It was trading at around 1,114 per Singdollar at the time of writing.
Tiger Fund Management’s Tan said recent instability in the country’s equity markets has prompted investors to sell technology stocks.
“We see further pressure on the won from potential capital outflows, particularly as the KOSPI Composite Index has fallen more than 30 per cent over the past month amid the continued unwinding of leveraged positions,” he said.
The South Korean authorities have also intervened to support the currency by buying the won, Reuters reported, citing a source.
Ringgit resilience
By contrast, the Malaysian ringgit is expected to prove more resilient than other regional currencies against the Singapore dollar.
The ringgit appreciated 3.67 per cent against the Singapore dollar in 2025 before giving up 0.78 per cent year to date in 2026. It was trading at around 3.19 ringgit to the Singapore dollar at the time of writing.
“This is largely because Malaysia is a net energy exporter amid the US-Iran tensions, which have pushed up energy prices,” said Sean Teo, sales trader at Saxo Singapore.
Edward Lee, Standard Chartered Bank’s chief economist and head of foreign exchange for Asean and South Asia, said Malaysia’s relatively “strong economic backdrop” should continue to support the ringgit.
“The country continues to attract foreign direct investment related to AI, while exports, including tourism as well as information and communication services, have held up and domestic demand remains resilient… These factors should help the ringgit weather periods of global market volatility,” he said.
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Winners and losers
In Singapore, manufacturers, precision engineering firms, electronics suppliers, marine engineering companies, tourism-related businesses and logistics providers competing regionally are expected to feel the impact of the widening gap between the local and regional currencies first.
“By contrast, sectors such as finance, pharmaceuticals and digital services are likely to be more insulated, as they compete more on value-added services and intellectual property than on price,” said Lizza.
Tiger Fund Management’s Tan added that the financial services sector would be a key beneficiary of a stronger Singdollar.
“Given the Singdollar’s stability relative to other regional currencies, Singapore could attract more inflows, supporting the broader wealth management and asset management industries as investors seek a relative safe haven,” he said.
eToro’s Wong said the “obvious winners” will be the businesses selling domestically in Singdollars, but with costs priced in a currency the Singdollar is strengthening against.
“That’s retailers, food and beverage chains, or even construction firms that are bringing in their materials or equipment from the region,” he said.
“The idea is that since input costs are lower while sales stay in a local currency, the gain goes straight to margin.”
OCBC foreign exchange strategist Christopher Wong said that, at a macro level, a firmer Singapore dollar helps cushion the economy against imported inflation, particularly when global energy and food prices are volatile.
“Energy importers, food distributors, retailers and manufacturers buying machinery, raw materials or components from overseas can benefit from lower costs in Singdollar terms, while consumers should see the clearest gains in areas such as overseas travel, online shopping and education,” he said.
