The Singapore Dollar (SGD) is the currency of the island nation of Singapore. Currency issued and verified by the Monetary Authority of Singapore. In circulation are coins in denominations of 1, 5, 10, 20 and 50 cents and 1 dollar.
SGD is popular with investors because Singapore maintains a relatively stable government in a region known for unrest. Singapore is also a major trading and transportation hub and also has a large stock exchange with more than 750 companies with assets of 900 billion Singapore dollars.
Singapore remains unique in the global economy as the only country in the world that uses a monetary policy system based on exchange rates rather than interest rates.
This means that the central bank of Singapore allows the SGD to rise and fall, intervening when necessary to maintain the exchange rate within a specific target line (which it does not disclose to the public).
The combination of a strong, stable economy and a monetary policy based on a unique exchange rate means that the AUD/SGD pair is projected to remain relatively stable in the short and medium-term.
As for the Australian dollar, the currency is dependent on the commodity market and, above all, the price of gold, as well as other minerals.
It is interesting to note that Australian banknotes are a polymer, the state, together with New Zealand, became the first to switch to plastic money. They are more durable, wear-resistant and durable.
In addition, a torn Australian dollar can be used as two separate bills with half of the face value of the whole. Moreover, the banknote is accepted not only in banks but also in ordinary stores.
It should also be noted that approximately 12% of the value of the Australian dollar is based on agriculture and agricultural processes. In the event of problems such as droughts or laws that relate to animal husbandry and restrict its transportation abroad, the Australian dollar will weaken.
The AUD / SGD pair is considered exotic and is not a popular choice among traders. This is due to the rather low trade turnover between Australia and Singapore and the complexity of the analysis of current trends.
Also, certain difficulties are caused by the fact that the Australian government does not play a big role in manipulating the currency, while in Singapore the state directly affects the exchange rate.
Singapore is a small country, but one of the most densely populated in the world. Despite this, the share of the domestic market in trade is relatively small. The country’s economy relies entirely on international trade.
In this regard, it is not surprising that the state provided guarantees against fluctuations in external conditions, which allowed the industry to flourish.
Singapore specializes in exporting electronics and chemicals and imports natural resources and raw materials that it does not have. The unemployment rate is low and there is a shortage of labor, which is compensated by foreign workers.
It is easy to see that the fundamentals of both countries can be very good, although perhaps Singapore has an advantage. However, when you bet on exchange rates, you should look at how the economy is changing.
Given the above facts, it becomes clear why many traders bypass the pair – with a growing demand for raw materials, the Singapore economy is also going uphill, but the Australian dollar is gaining strength, which excludes the possibility of a trading corridor.
At the same time, Singapore is highly dependent on the situation in shipping, the demand for high-tech products, and the economic and political situation in the Southeast. Therefore, applying not only technical but also fundamental analysis, traders can count on good profits.
Analysis of the annual chart shows that the pair has shown a fairly sharp amplitude of fluctuations over the past 10 years. To get from the bottom to the peak, it takes 2-3 months for the pair. Therefore, AUD/SGD can be attributed to long-term instruments.