How Strong The Singapore Dollar Can Get
By Monish Chhabra ǀ January 4, 2021
On the 23rd of March 2020 - around the same time when the global stock markets bottomed – the Singapore dollar hit its weakest level of 1.46 against the US dollar.
Since then, the global markets have risen spectacularly, and so has the Singapore dollar. By the end of 2020, the Sing dollar touched 1.32; appreciating by almost 10% against the US dollar.
In this article, we try to assess how much stronger the Singapore dollar can get, based on various statistical patterns of its past.
The following graph shows the history of the Singapore dollar against the US dollar, over the last two decades.
Singapore Dollar (for 1 US Dollar)
Three distinct paradigms that we can ascertain over this period.
The long-duration period of almost two decades, from 2003 till now, shown in blue. Over this period, the Sing dollar has an appreciation bias.
The medium-duration period of almost a decade, from 2011 till now, shown in orange. During this phase, the Singapore dollar is in a depreciation trend.
The shortest and most recent period of half a decade, from 2016 till now, shown in grey. Over this period, the trend in Singapore dollar is almost flat.
For each of these phases, we show a trendline in the respective colour, indicating high statistical probability where we may see a bottom in these graphs; and hence a respective top in the Singapore dollar.
We start with the medium-duration orange graph. For that trend to continue, the level of 1.36 that the Sing dollar hit in August 2020 had to hold. It did struggle around that level for three months until October 2020, and then broke through that trend.
The orange depreciating paradigm is no longer in play. It is not useful anymore, from a statistical point of view, to chart the future course.
Next, we look at the short-duration grey part. On this flattish-trend, the current level is quite close to the bottom i.e., the Sing dollar is quite close to the top. If this trend holds, we would see the Sing dollar peak within 2% from here; between now to 1.30 against the US dollar.
Last, we look at the long-duration blue graph. The most reliable statistical estimate of a possible reversal on this trend, is the blue line on the graph. If this line holds, we would see the Sing dollar peak within 5% from here; between now to 1.25 against the US dollar.
Statistics is a play of probabilities. Based on multiple distributions over the past two decades, we see two likely levels where the Singapore dollar may peak over the current cycle:
o If the recent trends hold, the peak is very close; around 1.30 to 1.31.
o If the older trends take over, the peak may be around 1.25 to 1.26.
If these levels break, there would be a new set of possibilities, and we would re-assess the odds.
For now, statistics tells us that the bulk of the rise in the Singapore dollar is over. The peak is likely within 2% from here, or at most, up to 5% from here.
This write-up is for informational purpose only. It may contain inputs from other sources, but represents only the author’s views and opinions. It is not an offer or solicitation for any service or product. It should not be relied upon, used or construed as recommendation or advice. This report has been prepared in good faith. No representation is made as to the accuracy of the information it contains, nor any commitment to update it.