SINGAPORE DOLLAR: THE NEXT CURRENCY TO FALL?

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Even the Singapore dollar, underpinned by a robust economy, has failed to escape the pressure facing its regional peers.

The currency has fallen more than 2 percent against the U.S. dollar from a two-month high hit just over two weeks ago, raising the question of whether it may play catch up with neighboring emerging-market currencies that have been caught in a brutal sell-off.

According to foreign exchange strategists, the Singapore dollar should remain "well isolated" from the heavy selling plaguing countries with external deficits such as Indonesia and India. The Indonesian rupiah and Indian rupee have depreciated 6.5 and 16.3 percent, respectively, over the past month.

"I don't think we'll see strengthening in the near-term, but it [the Singapore dollar] will outperform its peers on a relative basis," said Mitul Kotecha, head of global foreign-exchange strategy, at Credit Agricole. He expects the Singapore dollar to appreciate to S$1.26 (per U.S. dollar) by year-end, from S$1.28 on Wednesday.

"It's perceived as more of a safe haven relative to other currencies," he added.

Important factors that are expected to shield the currency from the emerging markets storm are the country's strong current account balance, which makes it more resilient to portfolio outflows, and high foreign exchange reserves, say strategists. In 2012, Singapore's current account surplus stood at 19 percent of gross domestic product (GDP), according to the Ministry of Trade and Industry.

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