S’pore firms ‘managing currency risk’ well in face of weaker dollar

SINGAPORE — The Singapore dollar may have fallen significantly in recent months against major currencies such as the United States dollar and euro, but several local companies exposed to these markets told TODAY that the increase in their operating costs has been manageable so far.

This is because they have put in place strategies in managing currency fluctuations, such as foreign exchange hedging and diversifying their exposures to different markets, to mitigate the impact of a weaker Singapore dollar.

The Singapore dollar has weakened around 8 per cent against the greenback and close to 10 per cent against the euro since end-April, when the local currency was at its strongest this year against these foreign currencies. Late in Asia today (Oct 1), the Singapore dollar was changing hands at S$1.4269 to the US dollar and S$1.5915 to the euro.

One company that has weathered the currency fluctuations is luxury bathroom and kitchen fittings supplier Hansgrohe, whose products are primarily manufactured in Germany. Managing director of the Singapore subsidiary, Mr K C Lee, told TODAY that the “balanced mix of revenue” — in Singapore dollars from domestic sales here and euros from exporting to the rest of Asia — has helped to mitigate the foreign exchange impact.

Ms Regina Lee, managing director of consumer goods distributor Amplitude, said the company places a currency buffer on its overseas deals. The company imports its products from Greece in euros and exports them to China in US dollars.

“We have to see what the past six months’ currency situation was and from there how far it will fluctuate, so we buffer about 3 to 5 per cent. For sales, if the currency stays as it is, we earn an additional 3 to 5 per cent; if there are any fluctuations, we are still covered within the 3 to 5 per cent. That’s quite a safe way to manage,” she said.

However, smaller and less diversified businesses such as traditional bread maker Jackson Bakery and Confectionery found themselves absorbing the additional costs in order to remain competitive. General manager Tang Siew Chuan said the cost of yeast has gone up by 0.5 per cent and is bound to increase further.

“We buy about half of our supply from a Malaysian supplier, who sources for yeast from the West. The Malaysian ringgit has depreciated by a lot, so our supplier’s costs have increased and they pass them on to us. It is not much so far, so we will absorb it to keep prices palatable for our customers,” Mr Tang told TODAY.

Singapore consumers are also cutting back on online purchases, said e-commerce startup ShopBack, which works with online retailers to offer cashback deals to users. ShopBack’s Singapore country head Josephine Chow said sales channelled to foreign merchants had slipped by 10 per cent in the past two months. During the same period, local merchants experienced a 40 per cent increase in sales, she added.

Economists said the currency fluctuations on the wider economy has been muted so far. UOB economist Francis Tan said: “A weaker Singapore dollar doesn’t necessarily make our exports cheaper. Singapore doesn’t have natural resources, so these have to be imported to make goods for export, so that cost continues to be high compared to the North Asian countries who produce similar goods as us.”