Singapore firms like Sats could see relief as US dollar declines, but SIA may lose out

[SINGAPORE] Asian currencies have rallied against the US dollar on the back of concerns that US President Donald Trump’s tariff war will hurt the world’s largest economy. But market watchers warn that the Singapore dollar’s strength against the greenback could cut both ways for companies here.

This week, the Singapore dollar rose to trade at above 1.29 against the greenback for the first time since September 2024.

In the year to date up to May 7, the Singapore currency has appreciated about 5.4 per cent against the US dollar.

This would typically be positive for Singapore companies with major expenditures priced in US dollars, as they would enjoy lower costs.

For example, airlines could benefit most from a weaker greenback, said DBS Group Research analyst Jason Sum.

This is because their major cost components – such as fuel, aircraft leases, and third-party maintenance, repair and overhaul – are US dollar-denominated. 

For airlines, fuel is the top cost item and typically accounts for about 30 per cent of their expenditures.

However, Singapore Airlines (SIA) is not expected to benefit from a stronger Singapore dollar.

Citing the group’s FY2024 annual report, Sum said that SIA’s hedging policies would result in a negative S$1.6 million impact on its pre-tax profit for every 1 per cent strengthening of the Singapore dollar against the US currency.

The national carrier will post its financial results for FY2025 ended March on May 15.

Meanwhile, freight handler Sats could report a boost in its pre-tax profit arising from an exchange rate in Singapore’s favour because it borrowed in US dollars. Sats, which generates about a third of its business from the Americas, counts the US as its largest contributor after it acquired air cargo handler Worldwide Flight Services. 

Although natural hedges are in place for Sats as costs offsets revenue in the same currency, for every 1 per cent rise in the Singapore dollar against the greenback, the group’s pre-tax profit would still rise by S$4.3 million, based on the group’s FY2024 annual report.

This is primarily due to translation gains on the US dollar-denominated debt for Sats, Sum noted.

Sats’ FY2025 results are slated to be published on May 23.

Sats issued US$100 million of 4.578 per cent fixed-rate notes in April under its US$3 billion multi-currency debt issuance programme.

Other companies, such as ST Engineering, are not expected to see a significant impact from foreign exchange movement, even as about 30 per cent of its order book is denominated in the currency.

Around 25 per cent of ST Engineering revenue is from the United States, noted Paul Chew, head of research at Phillip Securities. 

According to Chew, a weaker US dollar will be a marginal negative for the company, especially with their consistent use of hedging. “ST Engineering does not even disclose foreign exchange sensitivity. A reasonable change in the exchange rates would not result in any significant impact on its results.”

Shekhar Jaiswal, head of the equity research at RHB, noted that ST Engineering’s earnings impact is likely to be insignificant, as its currency exposure is managed actively through its treasury in addition to natural hedges.

ST Engineering will deliver its update for FY2025 first quarter ended March on May 9.

Christopher Wong, strategist for foreign exchange at OCBC, said that the US dollar continues to trade near recent lows to Singapore dollar as markets re-assess the tariff developments and a softer greenback.  

“We project USD/SGD to trade towards 1.2890 at end-2025 and 1.2820 by mid-2026,” Wong pointed out.