Singdollar could continue to strengthen against regional currencies in 2026: OCBC chief economist

SINGAPORE - The Singapore dollar could continue to appreciate modestly against regional currencies in 2026, which is a good sign for Singaporeans looking to travel overseas.

Speaking at an investment seminar for OCBC’s private clients on Jan 6, the bank’s chief economist Selena Ling said the low inflation seen in 2025 may creep up slightly in 2026, but there is no urgency for the Monetary Authority of Singapore to change its policy stance of allowing the Singdollar to gently appreciate.

“It’s very likely they will keep it unchanged. That means that the slope of the S$NEER is going to be slightly positive,” she said, referring to the Singapore dollar nominal effective exchange rate.

“The Singapore dollar will appreciate modestly against regional currencies, and it’s good news for all of you because that means that the Singdollar will strengthen against, whether it is Japanese yen or some other countries,” she added. Ms Ling noted that the Republic is in a “sweet spot” in 2026, given strong economic growth, resilient domestic demand and a stable monetary environment.

The Singapore economy expanded 4.8 per cent in 2025 – topping the Government’s forecast of 4 per cent. It was the economy’s best performance since 2021’s 9.8 per cent, when it bounced back from the pandemic-induced 2020 recession.

Calling 2025 a “stunning” year of growth, Ms Ling noted that there is a chance the Singapore economy may even exceed 3 per cent growth in 2026.

“If the artificial intelligence boom continues, if we continue to see finance and insurance do well, if we continue to see visitor arrivals, we may have a slightly better than even chance of exceeding the upper end of the official forecast of 1 per cent to 3 per cent year on year,” she said.

She noted that ASEAN performed well amid US tariff uncertainties in 2025, even as the market predicted that the front-loading of exports in the first half of the year would result in a payback in the second half.

“The payback never happened. If anything, the second half was even stronger than the first half. The whole AI-related boom, data centre boom, has benefited a lot of countries. But I think, in general, we also saw that interest rates were coming down. Domestic consumption was relatively resilient,” she said.

However, many ASEAN countries, including Singapore, might see a slowdown in 2026 largely due to “big surprises on the growth side” in 2025, she added.

In the US, OCBC expects the Federal Reserve to cut interest rates at least once in 2026.

“But whether there will be more than one cut this year or down the road, it depends on where inflation goes. The Fed is going to have a new chairman who is very likely to also be more dovish,” she said.

Mr Jerome Powell’s term as Fed chairman

is set to end in May.

The US Federal Reserve cut rates three times in 2025 to a range of 3.5 per cent to 3.75 per cent while projecting one more cut for 2026 amid softening labour and persistent inflation.

The rate cuts led the US dollar to underperform, said Ms Ling.

In 2026, OCBC expects the US dollar to soften moderately. However, US policy uncertainties, as well as increasing US debt levels, could weigh on the US dollar, said Ms Ling.

But if the Fed decides to pause rate cuts, it would give the US dollar some support, she noted, adding that the US dollar also tends to benefit whenever there is a big growth or geopolitical crisis.

“We have a very benign outlook. We don’t think the US is really at risk of a recession this year. Within most of the major economies, we will see fairly stable growth.”