Singapore currency
Assignment Course Title: International Finance Course Code: FIN-4104 Submitted By Jannatul ferdous jerin I’d 190411029 Finance & Banking 6th Semester, 4th batch Submitted To Dr. Md Akther Uddin Assistant Professor Finance & Banking School of business Submission Date: 15-11-2021 Introduction The Singapore dollar (sign: S$; code: SGD) is the official currency of Singapore. It is divided into 100 cents. It is normally abbreviated with the dollar sign $, or S$ to distinguish it from other dollar-denominated currencies. The Monetary Authority of Singapore issues the banknotes and coins of the Singapore dollar. As of 2019, the Singapore dollar is the thirteenth-most traded currency in the world by value. History Between 1845 and 1939 Singapore used the dollar of the Strait, this was replaced by the Malay dollar and since 1953, the Malaysian dollar and Borneo. In Singapore, the common currency continued to be used until it was integrated into Malaysia in 1963, but two years later it became independent and the monetary union with Malaysia and Brunei was separated. On April 7, 1967, Singapore established a Monetary Council and issued the first coins and notes. At the beginning, the Singapore dollar was pegged to the pound sterling at a rate of two shillings and four pence to the dollar, or S$60 = £7, working out to 8.57 dollars to the pound sterling ,in the early 70’s. On 1 October 2002, the Board of Commissioners of Currency Singapore (BCCS) merged with the Monetary Authority of Singapore (MAS), which took over the responsibility of banknote issuance. Singapore fixed its definitive exchange rate to a basket of currencies between 1973 and 1985. From 1985 onwards, Singapore adopted a market system based on the currency exchange regime, in which the Singapore dollar had the property of being a currency fluctuated, but strongly controlled by the Monetary Authority of Singapore in comparison with the other currencies with which Singapore carried out exchanges. Singapore dollar banknotes and coins Currently, tickets of 2, 5, 10, 20, 50, 100, 1,000 and 10,000 dollars are in circulation. As for the coins, they circulate of 1, 5, 10, 20, 50 cents and 1 dollar. Exchange rate of SGD The MAS operates a managed float regime for the Singapore dollar. The trade-weighted exchange rate is allowed to fluctuate within an undisclosed Policy band, rather than kept to a fixed value. The average exchange rate of Singapore dollars (SGD) to U.S. dollars (USD) from 2010 to 2020. In 2020, the average exchange rate from Singapore dollars to U.S. dollars amounted to approximately 1.38, meaning that one U.S. dollar could buy 1.38 Singapore dollars. The exchange rate of SGD from 2010 to 2020 we can see that SGD against USD sometime it appreciated and sometime rate is depreciated. In 2010 the rate was highly depreciated and after that the rate has appreciated but after 2015 the rate started to depreciate against USD . And finally we can see 2020 depreciated but in 2021 it seems like rate is appreciating Singapore’s Exchange rate Factors affecting the exchange rate of SGD 1. INFLATION RATE A country’s inflation rate causes a change in the value of its currency. For example, if Singapore experiences high inflation, you will observe a depreciation in the Singapore Dollars (SGD). This high inflation is typically related to the higher interests rates. In contrast, if Singapore experiences low inflation, you will observe an appreciation in SGD. And the prices of the goods and services will increase at a slower rate. Singapore’s annual inflation rate unexpectedly was at 2.5% in September 2021, compared with market estimates and August’s figure of 2.4%. 2. INTEREST RATE The interest rates set by the central banks influence the customers and investors. First, it affects the borrowing behaviour of customers. If the economy is overheated, central banks may increase its interest rates to make borrowing more expensive and discourage people. Second, it affects the balance between the investor’s safety of funds and the yield returns. For example, the yields for assets in SGD increases as interest rate goes up. This leads to an increased demand by investors and eventually lead to the appreciation of Singapore’s currency. 3. INCOME LEVEL Another factor affecting exchange rate is the relative income level. Income level of the country determines the imports demanded which affects the exchange rate. If Singapore income level increased at the same time the demand for foreign goods also increased. It means demand for foreign currency and depreciation of Singapore’s currency. 4. GOVERNMENT DEBT The government debt (public debt or national debt) is the balance owed by the government. Countries with immense amounts of government debt are less likely to receive foreign investors and foreign capital. As an effect, decrease in the value of their currency exchange rate will follow. The is 105.6% as of 2015. This signifies the country’s ability to pay back its debt. 5. GOVERNMENT BUDGET A government’s budget surplus or deficit have an impact to the currency exchange rate. For instance, when our government’s budget surplus is expanding, the exchange rate of SGD will grow competitive. The financial regulatory authority and central bank of Singapore is called The Monetary Authority of Singapore (MAS). An important institution that supports the effectiveness of the interventions given by MAS is the Central Provident Fund. Findings 1. the Singapore dollar is the thirteenth-most traded currency in the world by value 2. MAS operates a managed float regime for the Singapore dollar. 3. Singapore Exchange rate is affected by several factors ,like Inflation rate, interest rate, income level, government debt etc. 4. Interest rates in Singapore are largely determined by Foreign interest rates and investor expectations of the future movements in the Singapore Dollar. Domestic interest rates have typically been below US interest rates and reflect Market expectations of a trend appreciation of the Singapore dollar over time. Conclusions The Singapore dollar is the official legal currency issued by the Republic of Singapore. The country’s economy has become one of the strongest in the world, making the Singapore dollar one of the most widely traded currencies. The country’s central bank, the Monetary Authority of Singapore, closely monitors the foreign exchange rates for the Singapore dollar. Singapore’s dollar exchange rate is fluctuating trend .