Political unrest and economic challenges in Europe have contributed to the euro approaching a three-month low against the Singapore dollar, as of October 21. The euro has declined about 4.8% against the Singapore dollar so far this year, following a 6.76% gain in 2025. On October 22, the Singapore dollar was trading at approximately 1.44 per euro.
Analysts attribute much of the euro’s recent weakness to the contrasting economic growth trajectories between Europe and Singapore. Europe’s economy has expanded by roughly 1% compared to Singapore’s estimated growth of around 5%. The situation has been exacerbated by political instability in parts of Europe, particularly in France, where protests have centered on inadequate school facilities, teacher shortages, and broader concerns about rising living costs and deteriorating public services. These demonstrations in France began in September and have broadened to address issues such as government budget controls, public dissatisfaction over financial support to Ukraine, and inflation.
Similar protests have been reported in Portugal, where demonstrators called for action on housing affordability and living costs. In Italy, rallies against inflation and public service declines intensified into violent clashes between protesters and police in Milan and other northern cities.
European energy prices have risen sharply, with gas prices exceeding €80 per megawatt-hour, adding to inflationary pressures that pushed eurozone inflation to 3.8% in September. This presents a policy dilemma for the European Central Bank (ECB), as higher interest rates may help curb inflation but risk hindering economic growth.
In contrast, the Singapore dollar continues to benefit from the Monetary Authority of Singapore’s (MAS) policy framework that allows its currency to appreciate gradually. Despite MAS maintaining its monetary policy stance in October, the approach continues to support the Singapore dollar and helps mitigate imported inflation.
Market strategists caution that the euro may face additional weakness in the near term. A sustained decline below 1.43 against the Singapore dollar could lead to further decreases toward 1.42 or 1.40, according to some traders. Nevertheless, a reduction in energy costs, easing political tensions, or a more hawkish ECB could facilitate a rebound for the euro.
While the ongoing political uncertainty in France remains a key concern, some experts warn against assuming continuous euro depreciation. Forecasts suggest the euro could stabilize around 1.43 against the Singapore dollar by early 2027, although worsening sentiment in Europe would exert further downward pressure on the currency.
Fiscal challenges in France remain significant, with projections indicating that the interest rate on government debt may surpass nominal economic growth by 2029. Limited capacity to cut public spending or increase taxes complicates efforts to stabilize public finances. Although direct impacts on Asia are expected to be limited, concerns over rising borrowing costs in France could raise sovereign debt risk perceptions globally.
Within Asia, the Chinese yuan and Singapore dollar are viewed as relatively stable currencies, supported by strong government fundamentals such as robust foreign exchange reserves and sizable current account surpluses. Singapore government bonds may also attract safe-haven demand amid global uncertainties due to the country’s AAA credit rating and fiscal resilience.
Overall, the situation in Europe underscores the importance of fiscal discipline to prevent escalating debt burdens and budget deficits, a factor that boosts confidence in currencies like the Singapore dollar amid current market volatility.