Singapore’s S$NEER Update

As of May 20, 2025, Singapore’s monetary policy has been shaped by strategic adjustments to the Singapore dollar Nominal Effective Exchange Rate (S$NEER), a cornerstone of the Monetary Authority of Singapore’s (MAS) efforts to balance economic growth and price stability. With global economic growth slowing and inflation pressures easing, MAS has made calculated moves in January and April 2025 to reduce the rate of the Singapore dollar’s appreciation. These changes reflect Singapore’s unique position as a trade-dependent economy, where the exchange rate plays a pivotal role in shaping economic outcomes. This article delves into the mechanics of S$NEER, examines the implications of recent policy shifts, and explores their impact on businesses, consumers, and Singapore’s economic future in today’s context.

The S$NEER measures the Singapore dollar’s value against a trade-weighted basket of currencies from Singapore’s major trading partners, such as the United States, Japan, and key European nations. Unlike most central banks that rely on interest rate adjustments, MAS uses the S$NEER as its primary monetary policy tool, managing it through a policy band defined by three parameters: the slope (rate of appreciation or depreciation), the width (range of allowable fluctuation), and the center (midpoint of the band). By adjusting these parameters, MAS influences the Singapore dollar’s strength, which in turn affects inflation and export competitiveness. A stronger currency reduces the cost of imported goods, helping to curb inflation, while a weaker currency makes Singapore’s exports more competitive on the global stage.

In January 2025, MAS announced a slight reduction in the slope of the S$NEER policy band, marking the first easing of monetary policy since March 2020 MAS Monetary Policy Statement - January 2025. This decision was driven by a more favorable inflation outlook, with MAS Core Inflation moderating faster than expected, projected to remain below 2% for the year due to low domestic and imported cost pressures. The Singapore dollar had appreciated against most currencies in the S$NEER basket but weakened slightly against the US dollar, reflecting the latter’s global strength. This adjustment signaled MAS’s intent to support economic growth amid expectations of a slowdown in 2025, following a robust performance in the second half of 2024.

The recent S$NEER policy shifts have significant implications for various sectors of Singapore’s economy, affecting exporters, importers, consumers, and investors in distinct ways.

A slower appreciation of the Singapore dollar enhances the competitiveness of Singapore’s exports by making locally produced goods and services relatively cheaper for foreign buyers. This is particularly beneficial for industries like electronics, precision engineering, and logistics, which are critical to Singapore’s trade-driven economy, contributing approximately 30% to GDP through manufacturing exports. For example, a Singapore-based semiconductor firm exporting to Europe benefits from lower relative prices, potentially increasing demand and supporting job creation. However, the policy still allows for gradual appreciation, moderating these benefits to ensure the currency remains strong enough to maintain investor confidence and control inflation.

A stronger Singapore dollar typically reduces the cost of imported goods, which is crucial for a nation where imports constitute a significant portion of consumption. For instance, everyday items like coffee, electronics, and clothing become more affordable, and overseas travel, such as to Japan or Australia, becomes cheaper due to favorable exchange rates. In 2024, the Singapore dollar’s strength against the Japanese yen boosted outbound tourism, with over 1.2 million Singaporeans traveling abroad, a 15% increase from 2023. However, the slower appreciation in 2025 means that the downward pressure on import prices is less pronounced, potentially limiting cost savings for consumers.

The S$NEER adjustments are designed to manage inflation risks in a low-inflation environment. MAS projects that core inflation will remain below 2% in 2025, supported by declining global oil prices, which have dropped to around US$70 per barrel, and stable food commodity markets. By slowing the Singapore dollar’s appreciation, MAS reduces the risk of deflation while ensuring that inflationary pressures do not escalate. This is particularly important given that imported inflation has historically driven price increases in Singapore, with import prices contributing to nearly half of CPI inflation in high-inflation periods.

​A stable and gradually appreciating Singapore dollar signals economic stability, making Singapore an attractive destination for foreign direct investment (FDI), which reached S$190 billion in 2024, a 10% increase from 2023. However, an excessively strong currency can deter FDI by increasing the cost for foreign investors to convert their currencies into Singapore dollars. The 2025 easing of the S$NEER policy reduces this barrier, potentially boosting investment in sectors like technology and finance, which account for 60% of FDI inflows. For financial markets, the policy adjustments provide predictability, reducing currency risk for investors in Singapore’s stock market, where the Straits Times Index grew 8% in 2024.

MAS’s monetary policy is a delicate balancing act, requiring careful calibration to support economic growth while maintaining price stability. The 2025 policy shifts reflect MAS’s confidence in a low-inflation environment, allowing a more accommodative stance to bolster growth amid global uncertainties. Singapore’s economy is projected to grow at 1–3% in 2025, down from 3.5% in 2024, reflecting weaker global demand. By slowing the Singapore dollar’s appreciation, MAS supports export-driven growth, which accounts for 70% of GDP, without triggering inflationary pressures.

In today’s context, as of May 20, 2025, Singapore faces a complex global environment marked by trade policy frictions, particularly between major economies like the United States and China, and a potential tightening of global financial conditions. The US dollar’s strength, driven by Federal Reserve rate hikes to 5.5% in 2023-2024, has put pressure on Asian currencies, including the Singapore dollar, which weakened by 2% against the US dollar since January. MAS’s decision to ease the S$NEER policy reflects a strategic response to these pressures, aiming to maintain export competitiveness while ensuring price stability.

​The S$NEER remains a linchpin of Singapore’s monetary policy, enabling MAS to navigate the complexities of a trade-dependent economy. The 2025 policy adjustments, reducing the rate of currency appreciation, reflect a strategic response to a slowing global economy and low inflation, supporting exporters while maintaining price stability for consumers. As Singapore faces ongoing global uncertainties, MAS’s agile and balanced approach will be crucial for sustaining growth and resilience. Stakeholders, from businesses to consumers, should stay informed about S$NEER developments to make strategic decisions, ensuring Singapore remains a beacon of economic stability in a turbulent world.