Singapore’s FX Market Hits New Record of US$1.273 Trillion, Up 12%

Singapore’s daily foreign exchange turnover of US$1.136 trillion in October 2024 was 1.7 times that of Hong Kong, the largest gap since 2023.

Singapore’s foreign exchange market grew this year, doubling in size over the last four years, and expanded its lead over Hong Kong, as trade recovered during the Covid-19 pandemic and demand for hedging increased amid increased geopolitical tensions.

According to a semi-annual report released by the Singapore Foreign Exchange Market Committee on Tuesday, average daily turnover hit a record US$1.273 trillion in April. The survey showed that the volume increased by 12% from October 2024 and increased twofold from April 2021.

According to the committee, traditional foreign exchange trades, such as spot transactions, outright forwards, and swaps, were US$1.14 trillion, and the daily turnover of over-the-counter currency derivatives was US$133 billion. Since October 2024, they have increased by 8% and 50%, respectively.

International markets are spooked by the trade wars between the US and China, so investors and multinational companies started finding solace in the Southeast Asian financial hub for liquidity and currency risk management. Investors have also started the trend of asset diversification as the US dollar declines due to US President Donald Trump’s trade war.

According to Charu Chanana, Chief Investment Strategist at Singapore-based Saxo Bank, Singapore’s foreign exchange (FX) has increased due to its growing role as a regional liquidity hub, with structural demand from asset managers and companies increasing post-pandemic flows. She added that the increase might be due to interest rate volatility and rising hedging needs.

According to recent surveys, London’s foreign currency market was the most active in the world with daily transactions of US$3.2 trillion in October 2024 compared to US$1.2 trillion in New York.

Every year in April and October, the foreign exchange committees in Singapore, London, New York, Tokyo, Ottawa, Sydney, and Hong Kong come together to release their semi-annual surveys. However, Hong Kong is still pending, and Tokyo will postpone its report till August.

Singapore increased its advantage over Hong Kong this year, based on market trends over the previous four years.

Singapore’s daily foreign exchange turnover of US$1.136 trillion in October 2024 was 1.7 times that of Hong Kong, the largest gap since 2023, and a sharp contrast from 2020, when the two cities were neck to neck for first place.

The economists claimed that there was a strong momentum due to a global trend towards local currency settlement and increasing role of Asian asset flows. Additionally, investors have made efforts to reduce their reliance on the US dollar, such as bilateral currency swaps and an increase in the use of the Singapore dollar and renminbi (Chinese Yuan). It increased trade volumes in the region.

Additionally, Singapore’s central bank has invested S$1.1 billion ($856.36 million) with three asset managers as part of its S$5 billion plan to stimulate the stock market.

The central bank made this move as part of its ongoing investigation into the local stock market by the Monetary Authority of Singapore and a review group established in August last year to improve the local market functions.

For the Equity Market Development Programme (EQDP) in Singapore, the fund managers chose Avanda Investment Management, JP Morgan Asset Management, and Fullerton Fund Management, all of which Temasek, Singapore’s sovereign fund, owns.

MAS Financial Service considered various factors when selecting the managers, including whether their suggested fund strategies aligned with the goals of EQDP and their dedication to advancing Singapore’s asset management capabilities.

Since Singapore announced it would form a review group to restore its stock market in August last year, the benchmark Straits Times Index has increased 23.9%.