USDSGD

22 September 2026, 09:28 UTC Chief Investment Office GWM Investment Research

USDSGD: On course for 1.25 CIO View: USDSGD Teck Leng Tan, CFA, Strategist, UBS AG Singapore Branch Constantin Bolz, CFA, Strategist, UBS Switzerland AG

• We maintain our USDSGD target at 1.25 by September 2027, CIO Forecast- USDSGD Negative long term trend underpinned by continued SGD resilience and a gradual easing of USD strength. 22 Sep 26 1.28 Dec 26 1.28 • On the SGD side, strong growth and firm inflation should support further MAS tightening through a steeper SGD NEER appreciation Mar 27 1.27 path. Jun 27 1.26 1.25 • On the USD side, markets continue to price a more aggressive Fed Sep 27 tightening cycle than we expect, creating scope for USD weakness as Refinitiv, Macrobond, UBS calculation. *Purchasing Power those expectations are gradually repriced. Parity (PPP) is not a forecast per se, but a long-term equilibrium value for an exchange rate, calculated by UBS, TEEER refers to the 'trend-extrapolated equilibrium exchange rate', which is a three-year projection of the The SGD has stood out as one of the few APAC currencies to strengthen PPP. against the USD this year—it's up around 1%, compared with an average loss of 0.6% across the broader APAC currency complex. While this trails gains in the AUD, KRW, and CNY (which have risen by approximately SGD continues to benefit from 4-6%), the SGD's performance remains noteworthy given the backdrop MAS's policy of gradual SGD NEER of broad USD strength, with the DXY index up around 2% year to date. appreciation A key pillar of the SGD's resilience has been the Monetary Authority SGD nominal effective exchange rate (NEER) vs. of Singapore's (MAS) exchange-rate-based monetary policy framework, estimated policy band which maintains the trade-weighted SGD on a gradual appreciation path.

We continue to expect USDSGD to trend lower, reaching 1.25 by September 2027. Both SGD-specific and USD-specific factors underpin our constructive outlook for the Singapore dollar.

On the SGD side, we expect Singapore's 2026 GDP growth and core inflation to print near the upper end of the official forecast ranges of 4.5-5.5% and 1.5-2.5%, respectively. The ongoing AI investment cycle should continue to support growth, while elevated energy and food prices are likely to keep inflationary pressures firm. Against this backdrop, we expect the MAS to tighten monetary policy further at its October meeting by increasing the pace of SGD NEER appreciation to an estimated 1.5% Source: Bloomberg, UBS, as of September 2026 per annum, from our estimate of around 1.25% currently.

On the USD side, although the Federal Reserve is in a tightening mode, financial markets have already priced in a highly hawkish path, including three additional rate hikes, compared with our expectation of only one further hike. As such, we believe the balance of risks points to a softer USD should the Fed ultimately fall short of current market expectations.

USDSGD investment implications For USD-based investors, the SGD remains an attractive diversification currency, supported by its historically low volatility and the MAS-managed appreciation bias embedded within Singapore's exchange rate framework.

This report has been prepared by UBS AG Singapore Branch, UBS Switzerland AG. Please see important disclaimers and disclosures that begin on page 3.

We see limited appeal, however, in strategies that sell USDSGD upside risk SGD SORA rates have risen since April for yield pickup at current levels, as subdued foreign exchange volatility amid expectations of Fed rate hikes continues to constrain option premiums. Fed policy rate expectations are a key driver of SGD interest rates For SGD-based investors, foreign currency exposure should be added selectively given the SGD's track record of long-term outperformance against a broad basket of currencies. For those seeking additional yield in Singapore's relatively low interest rate environment, we continue to favor strategies that sell downside risk in AUDSGD at 0.902 or below.

SGD interest rate outlook We raise our forecast for the 3-month SORA rate to 1.3% (from 1.1%) across our forecast horizon of December 2026, March…