The Fed statement noted: “Recent indicators suggest that growth of economic activity moderated in the first half of the year. Job gains have slowed, and the unemployment rate has edged up but remains low.”
The Fed added: “Inflation has moved up and remains somewhat elevated. In support of its goals and in light of the shift in the balance of risks, the committee decided to lower the target range for the Federal Funds Rate by 1/4 percentage point to 4% to 4¼%.”
Selina Ling, chief economist and head of global markets research & strategy, OCBC, notes: “Market reaction on the Singapore side has been relatively muted. The USDSGD [US dollar, Singapore dollar currency pair] is mostly tracking the broader USD, while rates are little changed to slightly softer. The Fed rate cut decision has been highly anticipated, so it is not a real surprise per se.”
Since “Liberation Day” on April 2, when the Trump Administration announced a broad package of tariffs on imports, the US dollar index (DXY) has fallen by 6.6%. In contrast, the SGD has turned into a haven currency of sorts. The SGD has strengthened against the currencies of countries where several Straits Times Index (STI) stocks have operations.
See also: Expect further declines in the US dollar: JP Morgan Private Bank
In addition, the Singapore Overnight Rate Average (Sora) and the yield on 10-year Singapore Government Securities (SGS) have fallen since the start of the year, diverging from those of FFR and risk-free rates. Despite the stubbornly high US risk-free rates, the USD continues to weaken, a stated policy of the current US administration.
Dilip Kadambi, group chief financial officer (CFO) of IHH Healthcare, which is dual-listed in Singapore and Bursa Malaysia, explains how he juggles the movement of foreign currencies in the healthcare group.
IHH reports in ringgit (MYR), so its results are impacted by the relative movements of the MYR against the exchange rates of countries in which the group operates. The MYR strengthened against the SGD and Turkish lira (TRY) in 1HFY2025 compared to the same period a year ago. For instance, $1 was at RM3.50 in 1H2024 compared to RM3.30 in 1H2025.
See also: Taiwan life insurers caught in dilemma with costly FX hedges
Kadambi says: “External loans and borrowings that are not in the entity’s functional currency are fully hedged. We do not hedge the net assets of our foreign subsidiaries, and any translation arising goes to the foreign currency translation reserve in equity. Our foreign subsidiaries are largely local businesses running local revenue and local costs, which does not give rise to foreign currency exposure in the profit and loss statement. Dividends declared from subsidiaries are usually settled on a spot basis.”
According to Kadambi, the MYR has been appreciating against the various other currencies in countries where IHH operates. “We also guide analysts about our operating performance on a constant currency basis. That is how the actual underlying operations are, had it not been for foreign currency translations, which are non-cash and not realisable in nature. For example, on a constant currency basis for the year to June 30, our revenue and ebitda grew by 17% and 11% respectively, versus the reported 7% and 1%,” Kadambi explains.
Earnings on a constant currency basis are calculated by using the same foreign exchange (FX) rate to translate the results of IHH’s foreign subsidiaries for both the current and prior periods, so that the growth in revenue and earnings is not distorted by the relative movements in FX rates across the periods, Kadambi elaborates.
In addition to hedging, IHH uses MFRS 129, which is the financial reporting for hyperinflationary economies. A quick look at the TRY vs MYR shows that in the past five years, the TRY has weakened from TRY1.86 to TRY9.86.
Kadambi says: “MFRS 129 affects only our business in Turkey, since the Turkish economy was designated as hyperinflationary. As a result, the financial statements of our foreign operations in Turkey are restated to account for changes in the general purchasing power of the local currency using the relevant price indices at the reporting date. We guide the investment community/analysts towards our numbers ex-MFRS 129 to show the actual operating performance of IHH.”
Despite the challenges, he adds: “The revenue of our Turkey and Europe business unit has almost doubled over the last four years to RM7 billion in FY2024 from FY2021, of which almost 40% of the revenue is denominated in euros as a result of Acibadem’s foray into Europe and from the increased foreign patients seeking treatment at our hospitals in Turkey. This has de-risked our Turkey business from a FX standpoint.”
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Downside of a haven currency
For listed entities on the Singapore Exchange (SGX), the downside to a haven currency is that companies and REITs reporting in Singapore dollars are often negatively impacted by a rising and firm Singapore dollar. There are some exceptions — corporations with strong treasury teams can work out how to offset this strength.
As an example, since CapitaLand India Trust (CLINT) was listed in 2006, the Indian rupee (INR), the currency in which it receives income, has depreciated against the SGD by around 57% as of end-December 2024. CLINT’s distributions per unit (DPU) continue to grow, showing it is possible to actively manage capital and income to outgrow depreciating currencies.
Another REIT of CapitaLand Investment, CapitaLand Ascott Trust (CLAS), knows a thing or two about navigating foreign currencies. CLAS has a presence in 16 countries.
“We operate across 12 foreign currencies. CLAS’s geographically diversified portfolio balances currency movements, as stronger currencies offset weaker ones,” says Serena Teo, CEO of CLAS’s trustee managers.
“We adopt a natural hedge strategy by borrowing in the same currency as our underlying assets. For example, our recent acquisition of three rental housing properties in Japan was funded by net proceeds from the divestment of a property in Japan and debt denominated in Japanese yen (JPY). Where appropriate, we also hedge a portion of distribution income in selected major currencies, while accounting for hedging costs,” Teo explains.
As a result of CLAS’s proactive capital management and foreign currency diversification, the impact of foreign exchange after hedging on gross profit has historically been limited to the range of about 3%. “In the past year, CLAS tightened the range to under 2%. Most recently for 1H2025, the impact on gross profit was a gain of 0.2% and core distribution remained stable, rising 1% y-o-y to $91.6 million,” Teo adds.
Brace for impact
Singapore, a small and open economy, is unlikely to escape the impact of a drastic devaluation of the US dollar if Stephen Miran, the economist chairing the Council of Economic Advisers, pursues such a plan. The impact on companies reporting in SGD with overseas assets will not be able to escape the negativity surrounding such a volatile global financial system.
On Aug 8, Sembcorp Industries announced a net profit of $536 million for 1HFY2025 ended June, a disappointment to analysts who had been pretty optimistic on the local energy company’s outlook.
According to a press release and Sembcorp’s results presentation, its 1H2025 earnings were negatively impacted by two related FX events: a $23 million FX translation loss on earnings and a $95 million FX translation loss recognised through interest income from a deferred payment note (DPN).
In September 2022, Sembcorp divested Sembcorp Energy India (SEIL) to an Omani-led consortium for $2.1 billion. The payment to Sembcorp was via the DFN, which was priced in INR and based on the risk-free rate of 10-year Indian bonds plus a spread.
CapitaLand Investment said in its financial statement that it had higher FX losses of $18 million in 1HFY2025 compared to $15 million in the same period a year ago. The FX loss relates to a translation of receivables denominated in Chinese renminbi (RMB) and USD as the SGD strengthened against these currencies in 1H2025.
Singapore Telecommunications (Singtel) has benefitted from going overseas, acquiring a stake in Bharti Airtel in 2000 and acquiring Optus in 2001. This year, Singtel unlocked $2 billion by divesting 2% of Airtel. The growth of the Indian telco market has outpaced the decline in the INR versus the SGD in that period.
Over the past 15 to 20 years, local developers have been expanding overseas. CapitaLand and Frasers Property had entrenched overseas operations. In the past 15 years, City Developments acquired sites in the UK and Japan to redevelop as residential property.
Hongkong Land’s operational home is Hong Kong, and it is listed in London, Bermuda and Singapore. It is also an index stock. The reporting currency is USD. The main non-USD exposures are Mainland China and Singapore. In 1HFY2025, Hongkong Land made a net gain because of the strengthening of the SGD and RMB against the USD. Hongkong Land is in a better position than most developers, not just because of its reporting currency, but because its current management is focused on recycling US$10 billion ($12.83 billion) of capital by 2035 and narrowing the discount between share price and net asset value.
The impact of FX movements on Singapore Airlines’ (SIA) earnings is ambiguous. The airline made an FX gain of $240 million in FY2024, a loss of $203 million in FY2023, while in FY2025, there was not much impact. SIA’s largest cost is its fuel cost, which accounts for approximately 30% of the total cost. The group makes both gains and losses through hedging on fuel.
Among non-index companies, 17Live, the only company that emerged from a special purpose acquisition company or spac, reported a net loss of US$4.6 million in 1HFY2025 ended June and blamed the loss mainly on unrealised FX losses “that had no impact on cash flow”. After accounting for foreign currency translation gains, total comprehensive income for 1H2025 turned positive at US$2.6 million, 17Live said.
If not for FX, GHY Culture would have made a net profit of RMB5.8 million. Instead, it announced a net loss of RMB5.1 million in 1HFY2025 ended June and a FX loss of RMB9.8 million. The FX loss was mainly unrealised and arose primarily due to the appreciation of the SGD against the RMB in 1HFY2025, mainly from the intercompany balances denominated in SGD of the entities of the group in China, as the group has significant operations there, and the appreciation of the SGD against the USD, from the bank deposits denominated in USD, which are held for operational and financing purposes.
S-REITs face more FX challenges
Eight S-REITs are component stocks in the STI, accounting for around 9.7% of the index. Of them, only Frasers Centrepoint Trust (FCT) has a Singapore-only portfolio. CapitaLand Integrated Commercial Trust’s (CICT) portfolio is almost all in Singapore.
REITs are more exposed to the vagaries of floating rates because they have a simpler capital structure than companies, and are required to pay out 90% of their distributable income to retain tax transparency. Hence, REITs are unable to have retained earnings and revenue reserves, unlike companies. Thus, net asset values (NAV) could fluctuate based on their foreign asset exposure despite their natural hedges, as well as the hedging of the income they repatriate.
The S-REITs were encouraged to go overseas more than 10 years ago because the local market was too small. Yet, the REITs that have gone overseas have experienced challenges due to added costs from managing overseas properties, and mainly because of the loss in translation effects of foreign currencies against the SGD.
Nupur Joshi, CEO of REIT Association of Singapore (REITAS), said in a recent email interview: “The Singapore dollar’s strength in recent years has made overseas distributions look weaker when translated back, even where operational performance was solid and despite REIT managers putting currency hedges in place to mitigate this risk. That said, it should be seen as an additional layer of risk rather than a reason to dismiss investing in these REITs. After all, investors are compensated for the extra risk, as most REITs with purely overseas properties are trading at dividend yields of 8% or more, compared to the industry average of around 6%.”
ParkwayLife REIT (PLife REIT), whose largest unitholder is IHH, hedges its interest in the net assets of its Japanese operations. The effective portion of the hedge was recognised as a hedge of net investments in the statement of other comprehensive income, which offsets the foreign currency translation differences from the translation of the net assets of its Japanese operations. As a result of its hedging activities, PLife REIT reports a realised foreign exchange gain every year.
In its 1HFY2025 financial statement, CapitaLand Ascendas REIT (CLAR) said it recorded a foreign exchange loss of $11.6 million mainly due to the settlement of foreign currency-denominated borrowings. In 1HFY2024, CLAR recorded an FX loss of $44.9 million mainly due to the maturity of a JPY-denominated MTN or medium-term note.
For 1H2025, CLAR’s foreign exchange differences arose mainly from the revaluation of borrowings denominated in the AUD, GBP, HKD, USD and EUR. Cross-currency swaps were entered into to hedge against the foreign exchange exposure of certain AUD, GBP, HKD and USD-denominated borrowings.
As at the end of June, 65% of CLAR’s assets are in Singapore, 12% in the US, 13% in Australia and the remaining 10% in the UK and Europe.
In its 1QFY2026 for the three months to end-June, 53% of Mapletree Pan Asia Commercial Trust’s (MPACT) revenues and 54% of net property income are from its core Singapore assets. Also in 1QFY2026, MPACT reported that the lower contribution from the overseas properties was due to unfavourable foreign exchange impact from the strengthening SGD against JPY, Hong Kong dollar (HKD) and RMB, and lower occupancy and negative rental reversion.
To shield against interest rate and foreign exchange volatilities, 77.7% of MPACT’s total debt of $6.1 billion was either fixed-rate debt or hedged through interest rate swaps, while approximately 88% of MPACT’s distributable income (based on rolling four quarters) was either generated in or hedged into SGD as at June 30.
Twilight of Pax Americana
Capital management is likely to take an increasingly important role in the remaining years of the Trump presidency. Whenever the USD turns volatile, the Swiss franc (CHF) and SGD have been haven currencies, none more so than this year and next. Much depends on whether the US Supreme Court gets the Trump administration to roll back its tariffs and to maintain the Fed’s independence.
According to Miran’s paper, A User’s Guide to Restructuring the Global Trading System, it is a burden for the US to finance “the provision of reserve assets and the defence umbrella, as the manufacturing and tradeable sectors bear the brunt of the costs”.
No surprise then that US President Donald Trump has been pressuring the Fed, an independent body, to lower interest rates drastically.
“Trump is pressing ahead to reshape the seven-member Fed’s Board of Governors to align with his easing agenda. Two of his appointees, Michelle Bowman and Christopher Waller, already voted for a rate cut on July 30. Having nominated Stephen Miran to replace Adriana Kugler, who resigned on Aug 8, Trump has called for Lisa Cook’s resignation over allegations of mortgage fraud. Trump is intensifying pressure on Powell to resign, undermining him through criticism of the Fed’s costly renovations and his handling of Cook, while simultaneously moving ahead with interviews for potential successors ahead of Powell’s term expiration in May 2026,” notes a DBS report in September on the FX outlook for 4Q2025.
Some market watchers are concerned that bending the Fed to Trump’s (and Miran’s) whims will damage the Fed, the USD, the bond market and the global economy.
Trump has announced that the Fed should lower the FFR by 300 bps. “That would be dropping the current rate from 4.5% to 1.5%. That’s an enormous drop — one which has never been done except in the teeth of a deep recession,” notes Nobel Prize-winning economist Paul Krugman.
Such a steep fall in short-term interest rates will raise expected inflation and, as a result, long-term rates will go up. “Trump is likely seeking to establish fiscal dominance of monetary policy, a policy regime in which the Fed’s actions are dictated, not by an effort to achieve low inflation and full employment but by the desire to avoid hard choices on taxes and spending,” Krugman writes on Substack.
Gold as a hedge
An interesting counterpoint to Trump’s actions is the weakening USD, concomitant with a rising gold price.
As of the end of August, gold was up 31% for the year, according to the World Gold Council. Gold gained in all major currencies, despite a much weaker USD. As of Sept 8, gold continues to gain ground, so much so that some media have mentioned that gold could reach US$5,000/oz from its last traded price, indicating that the positive momentum carried on into early September.
In August, gold ETFs experienced inflows of US$5.5 billion, primarily driven by purchases in North America and the US. “Gold’s sensitivity to US real interest rates may increase as Western investors, particularly in the US, take a more active role amid softer demand from emerging markets. Among US investor segments, holders of exchange-traded funds show the strongest response to stagflation risks and have picked up their pace of investment over the last few weeks, not just in the US but in Europe too — where real rates are still rising — suggesting risk drivers are offsetting rates-based drivers,” the World Gold Council says.
A murky world lies ahead
As a nod to the current US Administration’s USD and interest rate leanings, Philip Wee, senior FX strategist, DBS, says that the DXY Index “has been trading in a descending price channel, underscoring an ongoing bias toward USD weakness. If intact, the channel projects the DXY ending 2025 within a 93–97 range.”
As for the SGD, Wee reckons that it could weaken too. “The NEER [Nominal Effective Exchange Rate] is coming off from the top after the policy review. We are going for a slowdown with GDP growth and inflation. So far, growth has surprised on the upside and inflation on the downside, but the expectation is the converse. I have a sense we are still resilient, and we may see front-loading because tariffs have not concluded.”
Barclays expects the Monetary Authority of Singapore (MAS) to stand pat in October before resuming FX policy easing in April 2026. “We expect easier financial conditions to persist into year-end, driven more by lower rates than a weaker FX. Our base case is now for the MAS to deliver a final round of FX policy easing, in the form of a 50 bps slope reduction from an estimated 0.5% currently to zero in April 2026. We also maintain our view for Singapore rates to remain on a broad declining trajectory into year-end, on tailwinds from the Fed resuming its easing with markets on the lookout for further signs of a US slowdown, a seasonally light 4Q2025 SGS supply and a modestly appreciating SGD NEER slope,” Barclays details.
The outlook for the global financial system in 2026 is murky. “Bessent and Miran are two of the architects of the ‘Mar-a-Lago’ economic blueprint, which promoted using tariffs to make US imports costlier and utilising US market access and security commitments as negotiation tools to compel compliance. They also advocated pressuring foreign holders of US Treasuries to swap them for ultra-long debt and targeted devaluation to make US exports more competitive,” DBS says.
Meanwhile, DBS points out that a flurry of one-sided trade deals has strained the US’s ties with allies by highlighting the cost of access to US markets, while reinforcing strategic distrust with rivals. “The result will likely be a stronger push among trade partners to diversify supply chains, reduce reliance on US buyers, and explore non-USD trade, leaving markets alert to longer-term shifts in trade flows and currency demand,” DBS says.
In 2026, upon Powell’s retirement, Miran and other Trumpists on the Fed’s board will hold sway over the Fed. Interest rates could fall to rock bottom despite inflation picking up and the economy slowing, causing long-term rates to rise, and the USD could weaken further in the face of rising long-term rates.
All this uncertainty leaves trade-reliant economies and their companies at the mercy of global headwinds.
