USD/SGD rose 0.3% to 1.2970, extending a steady climb since mid-June that has been linked to broader US Dollar strength. Singapore’s inflation data for May were softer than forecasts: headline CPI held at 1.8% year-on-year versus a 2.0% Bloomberg consensus, while core CPI eased to 1.4% against expectations of 1.6% and was unchanged from April. The moderation in services inflation helped offset firmer prices in food and transportation.
The Monetary Authority of Singapore and the Ministry of Trade and Industry expect inflation to pick up in coming months as higher energy costs feed through global supply chains with a lag. They also see domestic services inflation easing as labour cost pressures moderate. Risks remain skewed towards further upside if energy bottlenecks and input shortages persist and lift imported inflation, though weaker global growth alongside tighter monetary policy could temper price pressures.
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Drivers Of USD/SGD Strength And Singapore’s Domestic Backdrop
We see that USD/SGD is pushing towards the 1.3000 level, driven mostly by broad strength in the US dollar. This move has been steady since mid-June, reflecting a market that is pricing in a more resilient US economy after May’s non-farm payrolls data showed a robust addition of over 260,000 jobs. The current rate of 1.2970 sits at a key psychological juncture for the market.
However, the situation within Singapore presents a conflicting picture for the currency pair. The latest inflation report for May 2026 was softer than anticipated at 1.8%, with core inflation also holding steady at 1.4%. This suggests that immediate domestic price pressures are contained for now.
Despite the soft data, we believe the Monetary Authority of Singapore (MAS) will remain vigilant and maintain its policy of gradual currency appreciation. The official statement highlighted future risks from higher energy costs, a concern validated by Brent crude prices recently climbing back above $95 per barrel. The MAS is likely to look through the current inflation softness, focusing instead on these looming imported price pressures.
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Trading Strategy: Limiting USD/SGD Upside
This creates a scenario where the strong US dollar is pushing the pair higher, while the hawkish stance of the MAS should act as a significant cap. We do not anticipate a runaway move above the 1.3100 level in the coming weeks. Historically, the MAS has effectively used its currency policy to buffer against such external shocks.
Therefore, we see an opportunity in selling short-term upside in USD/SGD. We would consider selling call options or establishing bear call spreads with strike prices around 1.3050 and 1.3100 for July and August 2026 expiries. This strategy allows us to capitalize on the view that the MAS’s policy stance will limit further significant gains in the pair.
