Rabobank strategists report that the Monetary Authority of Singapore (MAS) has tightened policy through the exchange rate during the current energy shock. This move comes despite Singapore recording a negative Q1 GDP print, due to concerns that core inflation could rise.
They also describe Indonesia’s engagement with both Russia and the United States. Indonesia’s President Prabowo met Vladimir Putin in Moscow, while Indonesia’s defence minister agreed to deepen a US defence partnership.
The partnership is reported to allow US military aircraft flyovers, giving the Pentagon new routes to the Middle East and Asia. The strategists link these developments to the Strait of Malacca, a major energy and cargo chokepoint, which is associated with both Indonesia and Singapore.
They add that Singapore opposes new “toll ways” in key waterways. The strategists say Asian foreign exchange may react to policy decisions and geopolitical events.
We are seeing Singapore’s central bank taking a proactive stance against inflation, a move that we first observed gaining momentum back in 2025. They are strengthening the Singapore dollar to counter rising energy costs, even with their economy showing signs of weakness. Recent data showed Singapore’s core inflation holding stubbornly at 3.1% in March 2026, justifying this hawkish policy.
This deliberate strengthening of the Singapore dollar (SGD) presents a clear opportunity for currency traders in the near term. Given the MAS is committed to this path, using options to bet on continued SGD strength against currencies with more dovish central banks appears to be a sound strategy. The SGD has already appreciated over 1.5% against a basket of currencies this year, and this trend is likely to continue.
At the same time, we must watch Indonesia’s delicate geopolitical balancing act between the US and Russia. This diplomatic maneuvering has direct implications for the Strait of Malacca, a critical chokepoint for global trade. Over 84,000 vessels passed through the Strait in 2025, carrying nearly a third of all global traded goods, making any instability in the region a major risk.
This heightened geopolitical tension translates into a case for buying volatility. Any disruption, or even a perceived threat, to the Strait of Malacca would cause oil prices and shipping costs to spike dramatically. We only need to look back at the energy shocks of 2022 to see how quickly Brent crude can surge past $120 a barrel on such fears, suggesting that long-dated call options on oil are a prudent hedge.
