The cost of the appreciating SGD

The SG dollar has strengthen against every other reserve currency since the start of 2004.

There was a report by the New York Federal Reserve in 2004 which quantified that for every 10 percent appreciation of the Singapore dollar against the U.S. dollar and other reserve currencies would result in a domestic currency capital loss of more than 10 percent of GDP.

Looking at the charts above, since the start of 2004, the SGD has appreciated more than 15% against the USD, more than 10% against JPY and GBP and remained unchanged against the EUR.

Given Singapore's GDP of about 140 bn SGD in 2006, these currency fluctuations would mean a loss of about 14bn SGD ... wow ... which may explain GIC's and Temasek's interest in the US banks - better to hold their stocks than to hold the USD.