The value of our SGD is weighted against a basket of currencies
from countries that we trade most with.
In the basket, are the USD, Yen, Euro, Sterling Pound, AUD.
The weightage of each country with the SGD is dependent on the
volume of trade that is conducted over the last five years.
With the US Market being the most important market for our
manufactured products, the USD serves as quite a strong influence
over the value to the SGD.
Unfortunately, the USD is being weakened by the heavy domestic debt
from the borrowings committed by US Government to fund its way out
of economic recession.
The heavy borrowings were necessary to finance the wars that it has
got itself involved with in Afghanistan and Iraq, and the continued
expenditure to build a strong military, as well as to improve
'homeland security from scratch' - all made even more urgent and
necessary after their 9-11 nightmare.
The huge domestic debt situation is made worse by the huge trade
imbalance that the US is suffering from its trade relations with
practically every country. The USA import more for domestic
consumption then it is able to export to the whole world.
In a CNN special feature on Saturday night, a financial specialist
is anticipating another recession for the USA in 2005 - if the
present ballooning financial crisis is not addressed quickly in
2004.
While the USA is weighed down by its heavy financial burden,
Australia is having a great time with its exports to Asia and the
rest of the world - especially with the high demand of its
agricultural produces in China.
The Australian economy has been quietly humming from strength to
strength, from mid-2002 through end-2003, and still going
strong.
The AUD is very stronger against the USD, and although the SGD has
strengthened over the USD, the Singapore economy could not match
the performance of Australia in 2002 and 2003.
This has resulted in the SGD strengthening against the USD, but
comparatively weaker than the AUD, which is able to outpace the SGD
in achieving a higher exchange valuation with the USD.
With our high dependency on the large US Market and her economic
health for our industry and commerce, it is best that Singapore
prepare for the worse to come in 2005.
