Domestically, most Singaporean do not experience much changes to the value of the Singapore currency. Despite the fact that the Singapore Dollar (SGD) constantly fluctuates against other currencies in the world, prices of everyday products that are imported from overseas such as groceries, food or IT gadgets would usually remain unchanged.
The cup of kopi that you bought today might have cost you a dollar. Even if the beans were imported from Malaysia, and assuming the SGD appreciated against the Malaysia Ringgit, you will still not get the coffee any cheaper in the future.
For Forex traders who are trading currency pairs involving the SGD. Close monitoring of the performance of the SGD will be important given the impact of it on his profit and loss in his Forex account.
As for the average Singaporean, there are only two instances where Singaporeans will pay close attention to the exchange rates. When planning for an overseas trip and while doing online shopping. In either of this instance, a stronger SGD is desirable and will allow consumers to reduce their cost incurred.
The strength of the Singapore currency has an extended impact on the lives of Singaporeans. And this is the reason why the job of the Monetary Authority of Singapore (MAS) is very important.
Read Also: What Does MAS Really Do?
(1) Inflation
A stronger Singapore dollar makes imports cheaper. This is especially true for countries such as Singapore, which is the world’s 14th largest exporter and 15th largest importer. With imports being kept cheaper by the strength of the Singapore currency, Singaporeans will be able to spend less money on foreign goods, giving us a higher standard of living.
With Singapore being a big importer, a weak currency can push up our inflation rate. The central bank (i.e. MAS) will try to counter the rising inflation rate by increasing interest rate. However, such a move will also slow down the economy and will also impact the interest rates that you pay on loans such as your car loans and home mortgage.
(2) Wages
As stated above, the central bank can use interest rate as a possible tool to tilt inflation to a level that is desirable for the country. When interest rate increases, it can lead to a chain of effect that will ultimately affect our wages.
Higher interest rates result in companies having to cut back on investment and Singaporeans spending lesser due to the higher cost of borrowing. This lowers economic growth. With lesser demand, companies may seek to increase wages at a slower rate. Some may even reduce their workforce.
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