The Singapore dollar has rallied by some 6 per cent against the US currency since March and analysts see more strengthening ahead.
However, this is unlikely to have a significant bearing on the trade-weighted value of the currency targeted by the Republic's central bank to achieve its monetary policy goal of price stability.
Trade-weighted stability means the local dollar has moved in line with other major trading partners' currencies - euro, Japanese yen, Chinese yuan, Malaysian ringgit - and thus has little impact on its export competitiveness.
The Singapore dollar was trading at around 1.3710 versus the US dollar at the time of writing. The currency has come a long way from the 11-year low of 1.4610 on March 23 - the peak of the global financial market panic induced by the Covid-19 pandemic.
On March 30, the Monetary Authority of Singapore (MAS) slightly reduced the rate of appreciation of the trade-weighted, or S$NEER, policy band. The central bank said it will adopt a zero per cent per annum rate of appreciation of the policy band starting at the prevailing level of the S$NEER.
Mr Sim Moh Siong, currency strategist at the Bank of Singapore, said the policy move by MAS was aimed at stabilising financial conditions by ensuring a stable trade-weighted exchange rate.
"Financial conditions have stabilised, interest rates are low from where they were earlier this year, even the stock market has recovered. I would call it a desirable outcome," he said.
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"The Singapore dollar therefore remains vulnerable to the volatility that an increasingly tense US-China relationship would bring. While we expect the Singapore dollar to strengthen further, proxy hedging for geopolitical risk may limit its gains,"