Singapore’s government announced on Thursday that it would roll out a second economic stimulus package on Thursday, a move that saw a significant surge in the value of the Singapore dollar (SGD).
The newly announced stimulus package is aimed at helping Singapore’s economy to shield itself from the economic fallout caused by the coronavirus pandemic. Singapore is one of the countries that rely heavily on global trade, which means that the slowed economic trade due to the viral outbreak may negatively affect the city state’s economic growth. Like many countries, Singapore opted to release a stimulus package to help support the economy and that was evident by the SGD’s impressive performance on Thursday.
The SGD gained significant ground against the U.S dollar
Image source- Fxstreet
Investors were clearly stoked by the announcement of the stimulus package worth around US$33 billion by Singapore’s government as evidenced by the SGD’s performance against the USD. The above USD/SGD currency pair chart demonstrates the impact of the economic stimulus announcement on the price of the currency pair on Thursday. The price was quite bearish, which indicates that the SGD gained strength against the USD, thus the price gap between the USD and the SGD started to narrow.
Thursday’s trading session saw the USD/SGD drop from the day’s high at 1.4502 to the day’s low at around 1.4294. The bearish momentum continued on Friday morning, hitting the day’s low at 1.4253 before a retracement which peaked at 1.4364, before regaining its downward momentum. This bearish momentum indicates that investors are buying the SGD, thus fueling its rally against the USD.
Not out of the woods yet but Singapore’s government is keen on the situation
The coronavirus threat is still alive and its threat is still active in the market. In fact, it was largely responsible for the SGD’s weak performance a week ago, but the government’s new countermeasures seem to be pushing it towards recovery. In addition to the second stimulus package, the government plans to draw from the national reserves. This will be the first time that the government has touched the national reserve since the 2008 financial crisis.