You will be able to say how a change in the Singapore dollar affects imported prices, exporters, jobs and your overseas spending.
You open a shopping app and the Japanese snacks you buy every month cost a little less than they did in spring. Around the same time, a friend who works for a Singapore hotel says bookings from overseas guests are softer than expected. These look like two unrelated pieces of news. Very often they have the same cause: the Singapore dollar has strengthened.
A currency move touches you in several places at once, some good and some bad. This lesson takes them one at a time, so that when you read about a stronger or weaker dollar you can say what it means for your shopping, your employer and your savings.
Start with the part MAS cares about most. Singapore imports most of its food, almost all of its fuel, and most of the cars, phones, clothes and appliances you buy. Each of those is priced abroad in another currency, then converted into Singapore dollars somewhere along the chain.
Here is an example with made-up figures. An importer buys a carton of instant noodles from Japan for 2,000 yen. If 100 yen costs S$1.00, the carton costs the importer S$20. Now suppose the Singapore dollar strengthens until 100 yen costs S$0.95. The same carton costs the importer S$19, about 5% less, although nobody in Japan cut the price, because each Singapore dollar now buys more yen.
Not all of that saving reaches the shelf. Shipping, rent, wages and the importer's margin are paid in Singapore dollars and do not change with the exchange rate, so the shelf price falls by less than 5%, if it falls at all. Across thousands of imported items, though, the effect adds up, and prices in Singapore rise more slowly than they otherwise would. That is why a stronger dollar is MAS's main tool against inflation, as you saw in lesson 1.1, Why MAS manages the Singapore dollar instead of an interest rate.
A weaker Singapore dollar does the opposite. Imports cost more Singapore dollars and inflation picks up.
Now look at the other side. A Singapore company that sells abroad sets its prices in Singapore dollars or earns foreign currency that it converts back. When the Singapore dollar strengthens, its goods look dearer to foreign buyers, or it earns fewer Singapore dollars for each sale, or both.
This was Priya's question in lesson 1.2, Slope, width and centre: how the policy band works. Her company sells equipment to factories in the region. A stronger dollar means either raising its prices in foreign currency and risking lost orders, or holding them and accepting thinner margins.
Tourism works the same way. A stronger Singapore dollar makes a hotel night, a meal and a taxi in Singapore more expensive for a visitor paying in yen or in another currency. The hotel worker's soft bookings and your cheaper snacks can come from the same move.
So a stronger dollar is good for people who buy from abroad and harder on firms that sell abroad. If you work in manufacturing for export, logistics, hospitality or another trade-exposed industry, your job and your bonus sit on the side that can be squeezed.
For your household, a stronger Singapore dollar has three direct effects.
Holidays and overseas purchases get cheaper, because each Singapore dollar buys more foreign currency. Imported groceries and goods rise in price more slowly than they would have. Foreign assets you already hold, such as shares listed in the US or a fund priced in US dollars, are worth fewer Singapore dollars.
The third one surprises people. Say you hold US shares worth US$10,000, and the exchange rate moves from S$1.35 to S$1.30 for each US dollar. These are example rates. Before the move your shares were worth S$13,500. After it they are worth S$13,000, even though the share price did not change. Lesson 6.4, Currency risk in foreign investments, hedged and unhedged, works through this properly.
A weaker Singapore dollar flips each of these. Travel and imports cost more, and foreign assets are worth more in Singapore dollars.
When MAS tightens, the checkout price the next morning stays where it was. Importers still have stock they paid for at the old rate, and supply contracts were priced months ahead. Most shops change their prices a few times a year. Firms that sell abroad lose orders gradually, and they slow hiring or trim bonuses later still.
That is why the effect of a policy change takes months to show up in prices and jobs. MAS knows this, so its statements talk about where inflation and growth are heading over the coming year. Judge a policy change by that horizon. The prices you see in the week after it tell you very little.
The easiest way to make this real is to look at what you actually buy. Many items that feel local are imported: the rice, the cooking oil, the fruit, your phone, the petrol in a friend's car. Some are mostly local cost, such as a haircut or a hawker meal, where rent and wages matter more than the exchange rate, although the hawker's ingredients are often imported too.
Pull up last month's receipts or your card statement and look for the things that came from abroad. For each one, ask a simple question: if the Singapore dollar were stronger, would this be cheaper, and by roughly how much of the move?
List five things you bought last month that are mostly imported and note how each would be affected by a stronger Singapore dollar.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).