Few days back, you might have heard of MAS is going to tighten its monetary policy. Well basically MAS has set a range of how much SGD can appreciate or depreciate before they take action to buy SGD if it falls below the range and vice versa. By tightening monetary policy means allowing SGD to appreciate and fluctuate towards the higher side of the range which result in our currency strengthening. With SGD strengthening will result in foreign goods to be cheaper, thus consumers would want to spend more. However this will result in a decrease in investment and savings as consumers would want to spend more to take advantage of cheaper goods. Foreign investment will also decrease as it will be costlier to invest in Singapore given SGD strengthening. In time to come, FED will likely to increase their interest rate. As SGD interest rate is closely pegged to USD interest rate, SGD interest will likely to increase as well.
With interest rate rising coupled with SGD appreciating will cause a negative impact in Singapore equity market going forward.
*Last updated 31 Jan 2022
