The USD/SGD, a minor forex pair, is made up of the US dollar (USD) and the Singapore dollar (SGD), two of the world’s strongest and most stable currencies.The past decade has seen a period of productive collaboration between the countries, which has cultivated a promising investment opportunity.
Importantly, the FX pair offers an accessible route into the Pacific market, but while it may attract investors from all over the world, generating a profit is not easy.This guide will break down everything you need to know about trading USD/SGD.From exchange rates to forecasts, trends, and technical analysis, read on to find out what this currency pair has to offer.We also list the best USD/SGD brokers below.
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USD/SGD Economies
The United States is the wealthiest country in the world and it has one of the highest per capita incomes of $66,000. 80% of its GDP comes from services, 19.1% from industry, and only 0.9% from agriculture.
The USD is used as a reserve currency, and drops or rises in its price affect many other currencies.
Political and financial US events also impact the global forex market.
Historically, the Singapore dollar has served as an investment haven for traders.This is due to Singapore’s high interest and growth rates, loose controls, and less developed labor markets.The combination of these makes for an appealing investment option.
Furthermore, Singapore has seen significant economic growth after the Covid-19 pandemic.It now stands as one of the wealthiest economies in the Asia-Pacific region and rivals even the largest of the Western states, such as the UK and France.
The strength of Singapore’s position is in part due to its geography.It lies at the heart of several major international shipping routes, perfectly positioning it to be one of the world’s biggest international trading hubs.The country operates a free-market economy that heavily relies on international trade.The high dependency on trade means that fluctuations in foreign exchange markets can have significant implications on the value of the SGD.
Why Trade USD/SGD
- Volatility – While it carries risk, volatile pairs like the USD/SGD offer an opportunity to make big returns on relatively small investments.
- Volume – As a popular currency pair offering an easy route into the Pacific market, relatively large trade volumes means there plenty of opportunities for traders to turn a profit.When coupled with high volatility, it can make for even bigger profits.
- Availability of resources – Investors today have access to a whole host of tools, charts, and analysis.
Short and long-term forecasts and trends are more easily predicted. Resources include, but are not limited to, live exchange rates, candlestick and yearly-average charts, historical data, plus a breadth of real-time quotes.
- Regulation – Although the SGD is regulated by the Monetary Policy of Singapore, it is subject to much fewer restrictions than some of its neighboring currencies, such as the Chinese Yuan. Alongside the Japanese Yen, the SGD is one of the most accessible Asian currencies in today’s forex markets.
Risks Of Trading USD/SGD
While there are benefits of live trading USD/SGD, there are also drawbacks:
- Volatility – As with most forex pairs, the USD/SGD has a history of volatility. And while this can be an advantage, traders should be wary of how quickly prices can swing. Charts, technical analysis, predictions, and long-term forecasts are useful but may not always be enough, meaning investors should ensure they keep up to date with economic news and announcements.
- Settlement risk – Settlement risk occurs as a result of the difference in time zones. Currencies may be traded at different prices at different times during the day. AUD and NZD are credited first, followed by JPY, SGD, the European currencies, and then the USD. Funds could be credited to a party that declares solvency prior to executing its own payments. To minimize risks, traders should consider the market value of their positions and their potential exposure.
- Leverage – Low margin deposits may permit a high degree of leverage.
As a result, relatively minor price changes may result in substantial losses.
For example, if 10% of the position size was deposited as a margin, a price decrease of 10% would result in the total loss of the margin.
On top of this, broker fees are taken.
As a result, traders should follow tested risk management strategies to minimize losses and facilitate long-term trading.
- Automated bots – In today’s forex markets, competition is fierce. The sophistication and prevalence of advanced trading algorithms can make it tough to establish an edge. Bots will automatically enter and exit positions when favorable. To remain competitive, USD/SGD investors must utilize live charts, trend forecasts, graphs, and currency news. There are many currency converters and analysis resources also available. Some of the most popular include Oanda and Yahoo Finance.
Influences On USD/SGD Price
- Economic growth – The strength of an economy heavily influences the value of its currency. Indications of economic prosperity can be measured by employment levels, rates of interest, and inflation. Singapore boasts low levels of unemployment and a well-educated workforce compared to the US. However, these are factors that have already been priced into live rates. Traders should ensure they remain abreast of economic news relating to both countries.
- Value of raw materials – Singapore relies heavily on imports of raw materials to facilitate its export industry.
When the price of these materials increases, Singapore’s exports become more expensive and less competitive.
Exports make up much of the country’s GDP, and as a result, any change to the value of its exports will affect the strength of the currency as a whole.
- Political stability – Major political events such as presidential elections can have a significant impact on the value of USD versus SGD. When the value of the USD rises, it will strengthen against the SGD. A USD to SGD weakening occurs when the value of the dollar drops.
- Monetary policy – Monetary policy is controlled by the MAS and the Fed, the central banks of Singapore and the US, respectively. Any changes to the monetary policy made by the banks will heavily influence movement on live charts.
- Speculation – Currency speculation is when traders feel that a quoted price is incorrect and so buy and sell currency to make a profit. For example, if a currency is overvalued, investors would sell their reserves, triggering a fall in price. Speculation can have a big impact on the price of a currency. If there were to be mass selling of the USD, it would fall against the SGD. The reverse is also true.
USD/SGD Currency Correlations
No single currency moves independently of others. Currency pairs are all intrinsically linked. As a result, changes in any single one can have implications for others. For example, a move in the Euro would affect the price of USD, which in turn affects the price of SGD.
Currency pairs either have a positive correlation or a negative correlation:
- Positive – This is when pairs move in line with each other. EUR/USD, GBP/USD, and AUD/USD are all positively correlated.
Any change in USD tends to see each pair move in a similar direction. SGD is somewhat correlated with CNY, but it is subject to less severe regulation. A change in the value of the Chinese Yuan tends to be mirrored by SGD.
- Negative – This is when pairs move in opposite directions from each other. USD/JPY, USD/CHF, and USD/CAD are all negatively correlated. Any change in the USD, which is the counter currency, will typically lead each pair to move in the opposite direction.
Application
You can use the relationships between pairs to your advantage. For example, when trading the GBP/USD, keep an eye on the Euro/US Dollar, which can inform investment options. Although additional factors affect movements, such as economic policy and political events like the war in Ukraine, it is worth understanding the relationships between currency pairs.
USD/SGD Trading Strategy
An effective day trading or futures USD/SGD strategy should be more than just knowing how to use pip values to your advantage. Different strategies will work to facilitate a variety of aims in a multitude of environments. So, traders should always consider their objectives. Whether you prefer to use swap or forward rates or rely heavily on daily, 5, 10, or even 30-year charts, there are some basics that provide a good starting point.
Timing
Unlike some stock markets, forex trading usually operates between normal business hours.
Although there is no ‘best time’ to trade, there are certain windows that tend to be more favorable.
Importantly, the optimum time to trade forex is when the market is most active. During these periods, trading spreads (mid rates) tend to narrow. This means less money goes to the market makers, and more money goes directly to traders. When two markets are open at the same time, market volume increases dramatically, as does volatility. Both of which can translate to greater returns for investors.
Between 17:00 GMT and 18:00 GMT is when most trading happens on the Singapore and Sydney exchanges. As a result, it is the prime time to trade USD/SGD.
Risk Management
A tight risk management strategy should form the foundation of any type of USD/SGD investing. The 1% rule is a popular risk management strategy that lends itself to most objectives. The rule dictates that a trader should never use more than 1% of their portfolio on any given position. In doing so, investors minimize losses and increase the opportunity for long-term USD/SGD trading.
Establishing stop/loss limits is another risk management technique that can prove beneficial.
USD/SGD Price History
The SGD was adopted as the official currency of Singapore in 1967. Initially, it was exchanged at par with the Malaysian Ringgit, but in 1973 it was pegged to the GBP, followed by the USD for a short time. Today, it is pegged to a trade-weighted basket of currencies.
The SGD is regulated by the country’s central bank, the Monetary Authority of Singapore (MAS), which was established in 1971.
The USD/SGD has a relatively stable history, but like any forex pair, spot buying and selling rates are heavily influenced by political and economic factors.
Recent events, such as the Covid-19 pandemic, high oil prices, and the Russia-Ukraine war, have influenced the global forex market. The USD to SGD charts over the last 6 months have shown the US economy slowly strengthening against Singapore’s. A swift recovery from the pandemic was a major contributing factor. However, inflation rates of 8.3%, the highest they’ve been since the 1980s, have scared investors, many of which believe a recession could be possible.
Regarding records, the USD/SGD hit an all-time high of 1.81 in May 2002 and an all-time low of 1.19 in August 2011.
Note that a view of USD to SGD historical conversions (e.g., yesterday, the last 6 months, or even 20 years) is available at online FX brokers. Some even provide one-month forward forecasts and hedging cost details.
Final Word On Trading USD/SGD
Trading USD against SGD can provide plenty of opportunities to generate returns. The relative stability of the pair makes for an attractive proposition for both forex beginners and more experienced investors. While global events over recent months and years have made it increasingly difficult to forecast future trends, the outlook for the pair in 2023 looks promising. See our list of top brokers to start trading today.
FAQ
How Is USD/SGD Quoted?
The USD/SGD illustrates the number of Singapore dollars you can purchase for one US dollar.
The conversion rate varies throughout the day. See a live chart for a real-time update.