U.S. President Donald Trump’s attack on washing machine imports may end up putting the Singapore dollar through the spin-cycle.
Economic growth in the Asian city state has closely followed year-on-year changes in global trade volumes for almost twenty years, as the nation handles the second highest amount of containers in the world. Any escalation of U.S. protectionism, with Trump seen advocating his “America First” policies at Davos, could have an adverse reaction on investor expectations for Singapore’s growth, monetary policy and the local dollar.
Trump comes to the World Economic Forum with a rap sheet in the eyes of proponents of global trade. In his first year in office, he’s withdrawn the U.S. from the Trans-Pacific Partnership free trade deal and the Paris Agreement on climate change. He’s threatened to renege on the Iran nuclear deal, a free-trade agreement with South Korea, and the North American Free Trade Agreement (NAFTA).
The Singapore dollar is particularly exposed to investor expectations of future growth trends as the country’s central bank uses the currency as a monetary policy tool instead of interest rates. The local currency has risen about 1.6 percent against the U.S. dollar so far this year.
The Monetary Authority of Singapore is expected to shift to a 0.5 percent appreciation in the nominal effective exchange rate in April from the current zero appreciation, according to a research note from United Overseas Bank Ltd. Tuesday.