If you have not noticed, Singapore Dollar has appreciated sharply against to the USD in the past month. This could be surprise to many people as many have expected USD to appreciate after the US government shutdown and debt ceiling saga being “resolved”.
However, if you take a look at MAS announcement on Oct 14, it is hardly any surprise. MAS has maintained the modest and gradual appreciation path of the S$NEER policy band since April 2012 to help to alleviate inflationary pressures and anchor inflation expectations, as well as facilitate the restructuring of the economy.
S$NEER stands for S$ Nominal Effective Exchange Rate (S$NEER).
From the MAS chart and below chart publish by Fundsupermart. It clearly shows SGD has been on the path of appreciation since April 2010 when this policy was first implemented.
What is the impact to investors?
If you have been investing globally, you may or may not realize the important aspects of the fluctuation of your home currency.
Say you have converted SGD to USD to invest in S&P500 ETF SPY 3 months ago. The index seems doing well and has appreciated 4%. However, your home currency has appreciated more than 2% against USD. As a result, your real net return in SGD is less than 2%.
With the latest monetary policy statement from the MAS saying that there has been no change to the slope, centre or width of the policy band, investors ought to refine their investment strategy to manage their currency risk.
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