SINGAPORE: Companies here that deal in foreign trade as part of their business have recently felt – or are beginning to feel – the impact of a strengthening Singapore dollar.
The effect goes both ways: a stronger local currency tends to make imports cheaper for businesses such as property developers, catering or catering businesses such as supermarkets and restaurants, as well as retailers who buy materials or products abroad.
However, it could affect export demand from Singaporean companies that sell their products in overseas markets, industry players and companies told the Straits Times.
This is because the US dollar is the primary currency used in global trade.
One US dollar is now worth 1.3876 Singapore dollars, down from 1.4076 on July 13. The Singapore dollar is also appreciating against other major currencies such as the British pound.
This comes as the Monetary Authority of Singapore has increased its support for the local currency to calm inflation in recent months, with the latest adjustment on July 14.
OKP Holdings, which provides civil engineering services to the Land Transport Authority and PUB, the national water agency, is benefiting from a stronger Singapore dollar.
“The strengthening Singapore dollar will make our imports a bit cheaper as most of our imports are denominated in US dollars,” said OKP executive director Daniel Or.
The US dollar has strengthened since the Federal Reserve raised interest rates in May and signaled that further hikes were in store.
Ou says the stronger Singapore dollar has helped OKP manage the cost of US-dollar-denominated steel products from China, which are used in some of the company’s local projects.
Kurt Wee, president of the Association of Small and Medium Businesses, noted that a stronger local currency would help some retailers and property developers cushion the impact of expensive US-dollar-denominated goods and building materials.
It was crucial at a time when other operating costs, such as labor and shipping, were on the rise, he said.
“While this doesn’t completely negate the effect of inflation for importers, it could make a difference in helping these companies maintain the selling price of their products and services,” Wee said.
A FairPrice spokesperson noted that rising raw material, labor and logistics costs continue to present “significant challenges” for the supermarket retailer.
This despite the appreciation of the Singapore dollar.
“Nevertheless, we continue to employ various strategies such as stockholding, forward buying and diversifying our import sources in more than 100 countries to protect consumers from supply and price fluctuations.
“As a social enterprise, FairPrice will continue to ensure that essential items remain affordable and available to all, as part of our commitment to moderate the cost of living,” the spokesperson said.
Lakshmanan R, senior analyst at research firm CreditSights, said the strengthening Singapore dollar could help Singapore-based oil traders and companies that import crude oil for refining to manage price volatility. oil, which is traded and pegged to the US dollar. .
But Linus Goh, head of global commercial banking at OCBC Bank, stressed that the impact of the appreciation of the Singapore dollar will likely be offset by the strength of the US dollar.
“For wholesalers and manufacturers who source materials and sell goods in US dollars, the effect of the Singapore dollar would be offset,” Goh said. —The Straits Times/ANN