US dollar sinks to three-year low against Singdollar
US currency falls to 3-year low against Singdollar
The greenback sank to a three-year low against the Singdollar yesterday after US Treasury Secretary Steven Mnuchin said he would welcome a weaker currency.
His comments exacerbated an ongoing slide in the US dollar, which had already fallen 8 per cent against the Singdollar last year. This is good news for Singapore online shoppers but for exporters - who usually buy and sell overseas in US dollars - it is a double-edged sword.
A weakening US currency translates into lower earnings for exporters in Singdollar terms, and it also means they pay less for imports.
One US dollar could buy about $1.306 as at 7pm yesterday - down from $1.312 the previous day and almost 10 per cent lower than $1.45 at the start of last year.
Mr Mnuchin's comments - seen by markets as a departure from traditional US currency policy - were made at the World Economic Forum in Davos.
"Obviously a weaker dollar is good for us as it relates to trade and opportunities," he told a press briefing.
Mr Stephen Innes, head of Asia-Pacific trading at Oanda, said: "While we already knew the administration previously favoured a weaker dollar, Mr Mnuchin's comments caught the dollar prone and defenceless, opening floodgates to a massive wave of dollar-selling, and accelerated the expected US dollar downtrend."
Phillip Futures analyst Samuel Siew said the greenback could weaken further in the short term but is likely to recover in the longer run on the back of a strengthening US economy.
In addition, demand for US dollars is set to rise as more US companies are expected to repatriate funds to take advantage of new tax laws.
Mr Siew noted: "Major corporations such as Apple have announced their intention to return foreign earnings, left in foreign banks as stockpiles, to the US.
"With funds flowing into the US, the demand for US dollars is expected to increase.
"When that happens, the US dollar will strengthen."
Singapore exporters said the weakening greenback has eaten into profit margins, since sales are done in US dollars while costs are largely in Singapore currency.
Ideal Electric Singapore chief executive Charles Koh said: "We price our goods in US dollars, so when the US dollar goes down, we have less to cover our Singdollar expenses."
The company, which designs and manufactures high-end LED light fittings, exports most of its products to Europe, Australia and Japan.
Mr Koh added that his company is now paying closer attention to foreign exchange hedging given that more currency volatility could be on the cards this year.