The Singapore dollar has been very strong. This is a sign of a strong economy. But it also brings challenges for an economy when its currency appreciates. Competing against companies internationally is more difficult as those wishing to buy Singapore products and services have to pay the increased prices due to the currency appreciation. Often companies will absorb part of the currency increase but that reduce their profit (or forces them to reduce costs – which can mean layoff and reduced pay). Those making Singapore dollars though get the benefit of being able to buy more for the same price – the same S$100 buy 10% more if the currency has risen 10%.

Many countries try to devalue or at least prevent increases in value in their currency as this is often easier for politicians to do than helping move the economy to a new reality. Singapore however has taken serious steps (as you would expect, taking smart economic steps for decades is why their economy is so strong and currency has done so well) to accept that as they will have a stronger currency (especially when they see what Europe and the USA are doing – acting irresponsibly and making it hard to have faith in their currencies).

Here are some charts of the Singapore Dollar (SGD) versus other currencies over the last 12 years.

See the current SGD to USD chart on yahoo. Such a rapid accent in the currency makes it difficult for companies and individuals to react.

From July 2008 to early 2009 the SGD feel over 20% versus the Yen. Since then it has been risen about 7%.

Of course the Chinese Renminbi (CNY) is a special case it is pegged to the US Dollar and occasionally (since 2005) aloud to rise in value. Most economist believe it is still artificially undervalued. Essentially China wants to have the advantages of a lower currency value (easier for their companies to compete) and is willing to accept the costs (buying good from other countries is more expensive than it would be if the currency rose). Since January 1st of 2009 the SGD is up 11% versus the CNY.

Here is a chart of the USD versus the CNY where you can see it being held stable and then partially adjusting since 2005. The Chinese government has sent “ranges” of acceptable exchange rates versus the USD and normally it goes the the highest value China will allow in the “range” quickly.

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