The currency of Asia’s highest-rated nation reflects a level of economic anxiety not seen since the region’s financial crisis almost two decades ago. Singapore’s dollar is headed for a third straight quarterly loss versus its U.S. counterpart, and surging forward rates imply that the currency will depreciate at the fastest clip since 1998.
That signals pessimism about growth and deflation across the region because the Singapore dollar is often traded in place of currencies that aren’t as liquid. The island state is one of Asia’s main financial centers and its currency tends to be more resilient than peers from Thailand’s baht to Indonesia’s rupiah, making the bearishness even more significant.
“It’s used as an Asian proxy,” Rajeev De Mello, who oversees about $10 billion as head of Asian fixed-income at Schroder Investment Management Ltd., said by phone from Singapore. “When the market was bullish on Asia and bearish the U.S. dollar, the Singapore dollar did exceptionally well.” Now comes “a reversal of that trade,” he said.