The Monetary Authority of Singapore (MAS) believes its current policy is effective in managing risks. They are taking into account factors that affect local growth and inflation.

Gradual Approach Amidst Uncertainty

Singapore’s chief economist recommends a careful, gradual strategy during uncertain times. Regular quarterly reviews will ensure that assessments stay current. Recent figures show that Singapore’s GDP grew by 4.4% year-on-year in the second quarter, exceeding expectations of 4.3%. It also saw a quarter-on-quarter growth of 1.4%. The MAS’s declaration that its policy is “appropriate” indicates a steady path forward. This suggests there won’t be unexpected changes before their next scheduled review, making the Singapore dollar’s exchange rate more stable in the upcoming weeks. The core inflation rate for July 2025, at 2.8%, supports this view by indicating that price pressures are easing but not completely gone. Coupled with the strong 4.4% GDP growth in Q2, this data does not compel the central bank to make any immediate policy changes. Therefore, the MAS is likely to hold off on decisions until more data comes in.

Opportunities in Selling Volatility

With this focus on stability, we see chances to profit from selling volatility in the Singapore dollar. As market concerns about a sudden policy change diminish, the implied volatility on USD/SGD options is expected to decrease. This is a stark contrast to last year when the MAS had to make sudden adjustments to combat inflation. We believe that range-bound strategies for currency pairs like USD/SGD could be successful. We can take positions that earn profits as long as the exchange rate stays within critical technical levels, which appears likely. The MAS’s gradual approach supports these trading strategies until the next quarterly meeting. Now, we are closely monitoring upcoming data releases, especially the August inflation figures and the manufacturing PMI. Significant changes in these numbers could influence the central bank’s decisions during its October review. Additionally, we should keep an eye on global risk sentiments, particularly regarding China’s economic performance, as this has a considerable impact on Singapore’s outlook. Create your live VT Markets account and start trading now.

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