The Sing Dollar’s Long-Term Strengthening Binge May Be Flattening Out

By: Tom Cleveland (Guest Writer)

Singapore has been a success story worthy of much praise, analysis, and books attempting to pinpoint the prevailing strategies for other emerging nations to emulate.  An island country with a population of just over five million, Singapore ranks third in the world in GDP per capita behind only Qatar and Luxembourg.  The tiny republic is perfectly positioned on many sea and air trade routes and over the years has transformed itself into one of the major international transportation hubs in all of Asia.  After a slight contraction in 2009 due to the global economic slowdown, Singapore distinguished itself as being the fastest growing economy in the world in 2010 with real GDP growth of 14.5%.  

The nation’s currency, the Singapore Dollar, also reflects this amazing success story, as anyone familiar with forex trading could easily relate.  The chart below depicts the relationship of the Sing Dollar to the U.S. Dollar (the typical order of the currencies has been reversed to emphasize the strengthening moves that have occurred over time): 


A 5-year chart is presented that reflects a steady appreciation of the currency by nearly thirty percent over the period.  The one “hiccup” in the chart was the “recessionary jerk” in global economic flows that followed the failure of Lehman Brothers.  When a crisis of this proportion strikes, capital tends to flee to perceived safe havens, generally U.S. Treasury Bills and precious metals.  Fundamental valuations are nonexistent, replaced by knee-jerk volatility, a boon for currency traders, except for those invested in un-hedged carry trade positions. 


The above chart is actually not unique.  It is almost a mirror image for the same chart for the “AUD USD” or the “NZD/USD” currency pairs.  The growth story for the past decade has been the emerging markets in Asia.  All countries in Asia have benefited from the prevailing business model of off shoring from Western countries, especially to China and India, and the resulting redistribution of wealth and international commerce.  Currency exchange rates, the focal point of all international trade transactions, will accurately portray the winners and losers of this global competition. 


Singapore, however, is a bit more unique.  The long-term growth trend depicted in the chart actually has its roots some thirty years ago.  The Sing Dollar has appreciated at a steady rate, some 65%, for the past three decades, one more confirmation of the special success story for this island republic.  The only difficulty for local investors is that their investments overseas have been impacted negatively by their strong home currency.  The question now is can this long-term trend continue or is it running out of steam?


Experts at forecasting future currency positions believe that the currency has topped out, so to speak.  One-year projections put the “SGD/USD” ratio at 0.79, barely above today’s market quotation.  The “ascending triangle” in the chart above also signals that the market is unsure of the next major pricing movement.  Stock exchanges are hitting new highs in the United States after brisk run-ups over the past seven months, but everyone is holding their collective breath to see if the recovery is real.  At present, unemployment remains high, and deficits and public debt are expanding despite political rhetoric to reverse these trends.


One simple fact is true.  Singapore’s economy is not slowing down for the United States.  The general market perception is that the U.S. will recover and resume its economic leadership role, but the jury is still out.  Many economists, including those at the IMF, forecast low growth scenarios for the Western world, below 3%.  Caution is the watchword at the moment.

This Post Has 2 Comments

  1. Asiaforexmentor

    Aggressive trading psychology in Forex Market

    aggressive Aggressive trading psychology in Forex Market

    Each forex currency pair has their specific behavior which

    differentiates itself from other currency pairs; similarly each

    trader have their own different trading style and strategies.

    In this article we are going to focus on aggressive traders and how

    they plan their trades. We will highlight the factors that traders

    who are looking to follow an aggressive trading style should


    Being aggressive doesn’t mean using large stop loss or for that

    matter using no stop loss. Also it doesn’t mean entering many trades

    at a time and closing the ones that are in profit and let the ones

    that are in negative stay open, I will term that type of trading as

    reckless trading and this type of trading cannot produce profits.

    Now explaining what I mean by aggressive trading; for example when we

    consider retracements using fibonacci, the weaker levels generally

    lay around 25% to 35% while stronger levels are generally around 50%

    to 61.8% levels. What aggressive traders do is that they focus on

    both levels and conservative traders wait for their opportunities

    around the stronger levels.

    Aggressive forex traders can either choose to enter at both levels

    separately or sometimes can use strong trading levels to average out

    the first trade. Since the aggressive trading requires more number of

    entries therefore the margin required for trading also is reflected

    in the same manner and margin requirement is on the higher side.

    Similarly the risk and profit factor are on the higher side for

    aggressive trading as there are instances when there are multiple

    transactions open up and averaging each other.

    Another thing to remember, like all other factors, one should be very

    consistent in trading and should be following one consistent

    strategy. As the risk and reward factor is very high, generally only

    traders with large account size and reasonable experience indulge in

    such trading style.

    Although I do not recommend aggressive trading, traders who are into

    it should manage their risk % appropriately and accept the high risk,

    high reward mentality. If you think that is not for you, I would

    recommend you to trade like majority of the pros do – By picking only

    the best trades with price action confirmation.

    This way, although we trade lesser but we have a higher winning

    Forex is a psychology game, choose your path, demo it first and if it

    works for you. Stick to it whole heartedly. Do not jump ship when a

    new INTERESTING strategy comes along and you will be back to square

    1. However if your strategy is not working for you, find out the

    problem, tweak it and keep practicing it til you got it perfected.

    If you still have not found success in forex, check out our AFM

    winning Forex Course. It compromises of the whole system which

    traders need in order to trade successfully.

    See you on the other side!

    Asia Forex Mentor
    Ezekiel Chew
    Asia #1 Forex Mentor

  2. Evelyn Chong

    Good News To Singapore Traders, Just Launched In May, 2011!

    “Extreme Day Trading ”

    Check out this amazing new strategy for
    Forex and Stocks!

    It Works! Watch this video here for proof:

    Best regards,
    Evelyn Chong

Leave a Reply