Singapore Dollar: Strong exports underpin SGD – Commerzbank

Commerzbank’s Singapore-focused FX research highlights robust non-oil domestic exports driven by electronics and AI-related demand, with NODX growth already above the government’s upgraded full-year forecast. The report notes broad-based technology demand across major partners and expects this to keep the Singapore Dollar supported, alongside MAS’ steeper S$NEER appreciation path and a lower USD/SGD trend since July.

AI-led exports support Singapore Dollar

"July non-oil domestic exports (NODX) rose slightly less than expected but still by a firm 24.2% yoy (Bloomberg consensus: 26.5%) vs 20.8% in June. Growth continued to be driven overwhelmingly by electronics, which more than offset another contraction in non-electronic shipments. Year-to-date, NODX is up 19.4%, putting growth ahead of the government's recently upgraded full-year forecast of 14-16%, from 3-5% previously."

"In contrast, non-electronic NODX contracted 2.3% yoy vs -2.8% in June, reflecting continued weakness in chemicals, particularly pharmaceuticals and petrochemicals. Pharmaceutical exports plunged 57% yoy after falling 18% in June, while petrochemical shipments contracted 23% vs 28% previously. The weakness appears more consistent with ongoing sector-specific and supply-chain pressures than the latest US tariff measures."

"The US imposed a 12.5% tariff on around one-third of Singapore's domestic exports to the US following the Section 301 investigation on 24 July. However, pharmaceuticals, semiconductors, certain electronics, and energy products are currently exempt. Nonetheless, uncertainty surrounding US trade policy remains a downside risk to the broader export outlook, particularly if additional sectoral tariffs or trade restrictions are introduced."

"Looking ahead, the export outlook remains constructive as global AI infrastructure investment should continue to support electronics exports. NODX to the US surged 63% yoy in July, while shipments to China rose 38%, South Korea 53% and Japan 43%, suggesting that technology-related external demand remains geographically broad-based."

"In FX, USD/SGD fell 0.1% to 1.2780 yesterday amid a softer USD. The pair has trended lower since its July high of just under 1.3000. SGD should remain supported by strong export growth and MAS' decision to steepen the S$NEER appreciation path at both its May and July meetings. Year-to-date, SGD is up 0.6% against the USD, outperforming the average Asian currency ex-Japan of -1.9%"

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)