Singapore’s dollar is emerging as the top bet for Wall Street’s biggest banks as wagers the central bank will extend policy tightening bolsters demand for Southeast Asia’s top-performing currency.

Goldman Sachs Group Inc. favours the Singapore dollar the most among Asian currencies, along with Thailand’s baht. Citigroup Inc. recommends buying the currency on dips, while RBC Capital Markets says further policy tightening by the Monetary Authority of Singapore — which uses the nation’s foreign exchange as its main policy tool — will only turbocharge its gains.

While the relentless greenback strength has clobbered Asian currencies this year, Singapore’s dollar has held up relatively well thanks to a hawkish central bank and recovering economic growth. The currency has weakened 3.8% against the dollar in 2022, but has strengthened against all of its Asian peers with the exception of the Hong Kong dollar.

“We expect the MAS to steepen the SGD nominal-effective-exchange-rate slope by 50 basis points in October,” Goldman strategists including Danny Suwanapruti wrote in a research note. It “remains our favoured currency in non-Japan Asia,” they said.

Singapore’s dollar has outperformed as the MAS sought to curb inflation that’s raging at the quickest levels in almost 14 years. The central bank unexpectedly tightened policy last month — its second surprise move this year — to cool price pressures.

While the US dollar is likely to strengthen further and heap pressure on Asian assets, Singapore’s currency is one “we are favourably biased towards and prefer to buy the dips lower in SGD NEER,” Citigroup strategists including Johanna Chua wrote in a note.

The city state’s currency weakened 0.3% Thursday to S$1.4012 per US dollar.

Source: Bloomberg