Introduced after independence, in the year 1967, Singapore Dollar is the official currency of Singapore. Also known as ‘Sing’, this currency is often presented with the symbol S$. The banknotes and coins of Singapore are issued by the Monetary Authority of Singapore. The Singapore dollar is the 12th most traded currency in the world, and the 3rd most in Asia, behind the Japanese yen and the Renmimbi. Very recently, just in 2016, the Singapore dollar accounted for 1.8% of the daily trading volume. Research has it that if all of Singapore's notes and coins in circulation are joined together, they can go round the world 5 times!
Some facts that you ought to know about the singapore currency:
1. The short name for Singapore currency is SGD.
2. The nicknames for SGD dollar is NA.
3. The most repetitively used coins are S$1, 5S¢, 10S¢, 20S¢, 50S¢.
4. The coin of S$5, 1S¢ is used the least.
5. The most frequently used banknotes are S$2, S$5, S$10, S$50, S$100, S$1000 and rarely used banknotes are S$20, S$25, S$10000.
History of Singapore Dollar
The Singapore Dollar (SGD) is the official currency of Singapore, and it has a history as dynamic as Singapore itself. Before the Singapore dollar, Singapore was part of the Malaysian Federation, and the currency in use was the Malaysian Dollar. However, in 1965, Singapore became an independent nation, and as a result, it needed its own currency. The first notes and coins were introduced on April 7, 1967, marking the birth of the Singapore Dollar and replacing the Malaysian Ringgit at par. The founding Prime Minister, Lee Kuan Yew, stated the need for Singapore to have its own currency to symbolise "economic independence and sovereignty."
Initially, the Singapore dollar was tied to the British pound at a rate of S$60 to £7. This fixed exchange rate policy aimed to promote price stability and facilitate trade. However, after the pound was devalued in 1967, the Monetary Authority of Singapore (MAS) shifted the peg to a basket of currencies.
In the 1970s, Singapore transitioned to a flexible exchange rate to better suit its growing role as a financial hub. The Singapore Dollar was allowed to float within an undisclosed trading band. This provided the MAS with greater control over monetary policy to respond to economic conditions.
Faced with recession and high inflation in the mid-1980s, the MAS adopted a "managed float" in 1986, whereby the exchange rate was guided by the weighted averages of major trading partners' currencies. When the 1997 Asian Financial Crisis hit, the Singapore Dollar came under speculative attack. In response, the MAS widened the trading band from 2.5% to 5% on either side of a central parity.
Since then, the Singapore Dollar has appreciated significantly against major currencies. To slow its rise, the MAS has pursued a policy of "modest and gradual appreciation" through foreign exchange interventions while allowing market forces to largely determine exchange rates. According to the MAS, this policy has served Singapore well by keeping inflation low while supporting economic growth.
Over 50 years, the Singapore Dollar has evolved in line with the nation's development into a global financial hub. Once pegged to the British pound, the currency is now managed based on a basket of currencies of major trading partners and allowed to float within an undisclosed band. The Singapore Dollar has appreciated strongly, reflecting the economic success of Singapore.
Factors affecting Singapore dollars currency
The exchange rate is a crucial means of measuring a country’s economic stability and health. It also determines how a currency is performing and impacting the nation. Let's understand some of the factors that can affect the Singapore dollar:
1. Inflation Rate:
The inflation rate is one of the most significant factors influencing a country’s currency exchange rate. When a country experiences high inflation, its currency depreciates, while low inflation leads to an appreciation in the currency value. Singapore’s average inflation rate between 1962 and 2016 was 2.69%, with the lowest recorded at negative 3.10% in 1976. High inflation can cause negative impacts such as recession, depression, and high unemployment.
2. Government Budget:
A country’s government budget also influences its currency exchange rate. When a government’s budget surplus expands, the value of its currency becomes more competitive. The Monetary Authority of Singapore (MAS) is the regulatory body responsible for overseeing Singapore’s financial system, with the Central Provident Fund playing a crucial role in supporting MAS interventions.
3. Interest Rate:
The central bank’s interest rates influence the currency exchange rates. Higher interest rates can discourage borrowing behaviour, especially when the economy is overheated. Additionally, an increase in interest rates can lead to higher yields for assets in Singapore Dollars, resulting in an increase in investor demand and currency appreciation.
4. Government Debt:
When a government has debt, it impacts the currency exchange rates. Countries with high levels of public debt are less likely to receive foreign investment and capital, which can lead to a decrease in their currency value. Singapore’s government debt was 105.6% of its GDP in 2015, indicating its ability to repay its debts.
read less
