USDSGD

27 July 2026, 15:55 UTC Chief Investment Office GWM Investment Research

USDSGD: MAS tightening underpins SGD, but near-term USD strength prevails CIO View: USDSGD Teck Leng Tan, CFA, Strategist, UBS AG Singapore Branch Dominic Schnider, CFA, CAIA, Strategist, UBS Switzerland AG

• The MAS tightened monetary policy in July, by slightly quickening CIO Forecast- USDSGD Negative long term trend the pace of SGD NEER appreciation. The positive impact on SGD was modest, not least because the SGD NEER has already been trading 27 Jul 26 1.29 close to the strong side of its policy band. Sep 26 1.28

• On the US side, with the Federal Reserve staying hawkish, USD Dec 26 1.28 strength is likely to persist in the near term. So, we revise our USDSGD Mar 27 1.27 targets to 1.28, 1.28, 1.27, and 1.26 for September 2026 through Jun 27 1.26 June 2027 (from 1.26, 1.25, 1.25, and 1.24, respectively). Refinitiv, Macrobond, UBS calculation. *Purchasing Power • For USD investors, the SGD continues to be a good candidate Parity (PPP) is not a forecast per se, but a long-term for currency diversification, given its stability and policy-induced equilibrium value for an exchange rate, calculated by appreciation trend. As for SGD investors, we favor selling the UBS, TEEER refers to the 'trend-extrapolated equilibrium downside price risk in AUDSGD at 0.895 or below, for yield pickup. exchange rate', which is a three-year projection of the PPP.

SGD nominal effective exchange rate The Monetary Authority of Singapore (MAS) tightened policy this week by (NEER) versus policy band "very slightly" quickening the pace of SGD nominal effective exchange rate The MAS uses a strengthening SGD NEER to mitigate (NEER) appreciation to an estimated 1.25% p.a. (from 1% p.a. previously). inflation pressures While the SGD strengthened modestly following the decision, the USDSGD continued to trade near 1.29 against a backdrop of broad USD strength.

On Singapore's GDP growth, the MAS adopted a more optimistic tone compared to its April assessement, noting that growth risks related to higher oil prices have eased, and have been mitigated by strong global AI capex demand. Importantly, the MAS now expects the output gap to "widen slightly in 2026," compared with its view in April that it would "narrow to around zero in 2026." On inflation, while the MAS left its core and headline inflation forecasts unchanged at 1.5-2.5%, it sees core inflation rising in 3Q26 and staying elevated in 4Q26, before rolling down from 1Q27 onward. It also signaled vigilance, noting that emerging Source: Bloomberg, UBS, as of July 2026 upstream cost pressure is likely to translate into latent inflation pressure.

Given this mixed growth and inflation outlook, the MAS judged that a very slight tightening is justified, effectively bringing monetary policy settings to

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

a "mildly restrictive" state. Lastly, the MAS signaled that further tightening Short-term rates (SGD SORA and USD will occur only if necessary. We currently do not expect the MAS to tighten SOFR) remained stable, while long- in October, unless inflation pressure accelerates significantly. term yields (SG and US 10-year) spiked USDSGD investment implications amid global bond selloff SG vs. US interest rates While the quickened pace of SGD appreciation reaffirms our medium-term positive SGD view, we acknowledge that near-term USD strength will likely continue to hinder the USDSGD's decline in the coming months, as the Federal Reserve maintains its hawkish tone. Giving more weight to a well bid USD, we adjust our USDSGD forecasts to 1.28, 1.28, 1.27, and 1.26 for September 2026 through June 2027 (from 1.26, 1.25, 1.25, and 1.24, respectively). We expect USD strength to ease in 2027, when subsiding inflation and slowing economic growth in the US prompt the Fed to adopt an easing bias.

For USD investors, the SGD continues to be a good candidate for currency diversification, given its stability and policy-induced appreciation trend. Source: Bloomberg, UBS, as of July 2026 We think selling USDSGD upside risk…