The Singapore dollar hit its lowest in about two months, while most other Asian currencies were subdued on Thursday as traders flocked to safe-haven assets amid a potential U.S. debt ceiling deadlock and expectations of further Fed rate hikes.
The Singapore currency came under pressure after data showed the economy contracted in the first quarter, raising the risk of a recession in the city state as the global economic outlook weakens and major trading partner China struggles for a post-COVID lift-off.
On a quarter-on-quarter, seasonally-adjusted basis, the economy shrank 0.4%, a reversal from the 0.1% growth in the fourth quarter of 2022.
The Singapore dollar depreciated 0.2%, eyeing losses for a fourth straight session, while its benchmark shares fell 0.3%.
“Overall, we remain more optimistic relative to Singapore’s Ministry of Trade and Industry, with our 2023 GDP growth forecast of 1.8% modestly above the 1.5% midpoint of the official 2023 forecast range,” said Brian Tan, an analyst at Barclays Bank.