Published Thu, Jun 4, 2026 · 10:01 AM

[SINGAPORE] The gap between Singapore and US swap rates has widened to a record, a trend likely to extend as foreign inflows keep the city state’s liquidity ample while inflationary pressures increase US dollar borrowing costs.

The two-year Singapore dollar swap was at a discount of 246 basis points to its US counterpart this week, the deepest based on data going back to 2020.

The momentum looks poised to intensify as a strong Singapore economy fuels expectations for currency appreciation, which may further accelerate the Iran war-induced safe-haven capital inflows. In contrast, the Federal Reserve may come under pressure to raise interest rates due to elevated energy prices.

“We see this as a function of capital inflows and ample liquidity on the SGD side,” said Galvin Chia, an emerging Asia strategist at Societe Generale. “Inflows to Singapore have kept liquidity conditions flush, translating into more resilient SGD rates despite rising global yields.”

Singapore’s overnight interbank rate, a local benchmark of borrowing costs, hit a near nine-month low last week and remains more than three percentage points below its 2022 peak.

The Asian country’s economy grew 6 per cent on year in the first quarter, compared with 5.2 per cent estimated by economists in a Bloomberg survey. The government maintained its 2026 growth forecast of 2 to 4 per cent.

The outlook has prompted some analysts to forecast the Monetary Authority of Singapore (MAS) to tighten policy in July. The MAS uses the exchange rate, rather than interest rates as its primary monetary policy tool because Singapore is an open, trade-dependent economy. A policy tightening move effectively translates into currency apprec...