Bank analysts have two big reasons to be bullish on the Singapore dollar

The Singapore dollar has remained resilient against the buoyant U.S. dollar compared with its determination peers, and analysts accidental it's a comparatively "safe haven" currency — particularly successful Southeast Asia.

Singapore's currency has fallen by astir 6% year-to-date, but different currencies successful Asia person weakened adjacent much against the greenback.

The Japanese yen has depreciated by astir 25% against the U.S. dollar since the commencement of the year, portion the Philippine peso fell astir 15% and the Thai baht mislaid 13% during the aforesaid period.

It comes arsenic the U.S. cardinal slope continues to clasp a hawkish stance toward inflation.

Last Wednesday, the U.S. Federal Reserve raised benchmark involvement rates by different 75 ground points for the 3rd consecutive time, and signaled it volition proceed raising rates to arsenic precocious arsenic 4.6% adjacent twelvemonth earlier stopping.

The quality pushed the U.S. dollar to a caller two-decade high, and widened the involvement complaint differentials betwixt the greenback and galore different Asian currencies.

Bank analysts accidental they are bullish connected the Singapore currency adjacent though it fell to 29-month lows connected Thursday, aft the Fed's hawkish argumentation outlook.

"The Singapore dollar is usually considered a haven currency compared to Southeast Asian adjacent currencies," said Max Lin, Asia FX and rates strategist astatine Credit Suisse.

He named Singapore's precocious overseas currency reserves, a beardown existent relationship surplus and a good managed currency argumentation arsenic immoderate reasons for the Singapore dollar's resilience.

1. Strong economical fundamentals

"Whenever there's crises oregon shocks, determination has been involvement oregon [a] determination into the Sing-dollar," said Saktiandi Supaat, determination caput of forex probe and strategy astatine Maybank.

Singapore is 1 of a fewer countries successful the satellite with a triple-A sovereign recognition rating, beardown existent relationship surplus, and affirmative overseas currency reserves — factors that lend to its presumption arsenic a harmless harbor for investors, Supaat pointed out. 

"Singapore has important surplus reserves to tide done crises. That makes it decidedly 1 of the elements of a harmless haven currency," helium told CNBC. "Given the different characteristics it has, it tin play a relation to capable up immoderate of the gaps wrong the harmless haven space."

The Singapore dollar is "still 1 of the astir resilient successful the region" and its spot volition payment companies that person treasuries successful the country, said Philip Wee, elder currency economist astatine DBS Bank.

"In times of exceptional dollar strength, [the Singapore dollar] is the 1 that preserves its worth champion ... it doesn't depreciate arsenic overmuch arsenic the others and it's backed by its [exchange rate] argumentation and framework," helium said.

He said the Singapore dollar is "a haven for investors with currencies that are little resilient."

2. Central slope policy

Unlike galore cardinal banks, the Monetary Authority of Singapore (MAS) uses the Singapore dollar nominal effectual speech complaint — referred to arsenic S$NEER — argumentation set to keep ostentation successful check.

Most of the different countries successful Asia usage involvement rates arsenic a main argumentation instrumentality to negociate inflation. 

"Singapore's tiny geographic size and its presumption arsenic a small, unfastened system mean that astir each consumable goods are imported," Lin said. 

"Therefore, the MAS reacts to precocious ostentation by allowing the Singapore dollar to admit against adjacent currencies, thereby driving down the outgo of imported goods successful section currency terms."

"I judge that investors besides subordinate the beardown [Singapore dollar] with Singapore's competence and reliability, arsenic a spouse and gateway to the region," Wee said.

Even though the Singapore dollar has been a beardown performer successful the region, it won't beryllium replacing the Japanese yen arsenic Asia's harmless haven currency anytime soon, analysts told CNBC.

The Singapore dollar is not arsenic wide traded arsenic currencies of larger economies, Maybank's Supaat pointed out.

"It's not arsenic heavy capable successful presumption of liquidity," helium said, adding that it's not arsenic wide traded arsenic the Australian dollar, British pound, oregon adjacent the Japanese yen.

The Singapore currency is not immune to the spot of the U.S. dollar either, said Wee, who warned that the Singapore dollar could suffer its footing arsenic Asia's outperformer should determination beryllium a planetary recession.

Normally, erstwhile there's a planetary recession, Singapore's nominal effectual speech complaint tends to driblet from the apical to the bottommost of the [policy] band, perchance weakening the Singapore dollar to the 145 level against the dollar, the currency economist said. 

"This is the main risk, oregon main risk, for investors seeking [the Singapore dollar] arsenic a haven," Wee added. 

Maybank said it expects the MAS to proceed connected the way of argumentation tightening arsenic the state continues to grapple with ostentation that reached a 14-year precocious successful July. 

However, Lin said Credit Suisse expects that "the Singapore dollar volition weaken vis-a-vis the U.S. dollar," and predicted that the currency volition weaken to 143 by year-end.

To stem the yen's crisp declines, Japan reportedly intervened successful the currency markets — the archetypal involution since 1998.

The determination Thursday came aft the yen weakened past the 145 level pursuing the Bank of Japan's determination to clasp involvement rates dependable and instrumentality to its ultra-low involvement rates.

The currency strengthened much than 2% against the greenback connected quality of the intervention, but analysts accidental its upside is not apt to last.

"On the 1 hand, the Ministry of Finance is reducing yen proviso via occasional FX intervention, but the Bank of Japan is inactive persistently boosting yen proviso with its regular purchases of [Japanese Government Bonds] arsenic it enforces its 10y JGB output target," Lin said.

"Because Japan has an unfastened superior relationship and overmuch little involvement rates than the US, the 'impossible trinity' dictates that it is intolerable for Japanese authorities to power its speech rate," helium said, referring to the economical mentation which states that nary state tin person a fixed overseas speech rate, an autarkic monetary argumentation and escaped superior flows.

"In bid to forestall semipermanent yen weakness, the BoJ would person to rise involvement rates [or] the JGB output target, oregon Japan would person to enforce superior controls — the second is highly unlikely," helium added.

The Japanese yen was trading astatine astir 144.38 against the greenback aboriginal Tuesday successful Asia.

— CNBC's Jihye Lee contributed to this report.