Jittery local depositors flee to foreign currencies as SGD steadily deteriorates

Foreign currency deposits have ballooned by $2b.

More depositors are ditching the Singapore dollar as its weakness against the greenback intensifies. Data from JP Morgan show that local currency deposit growth has slowed to a crawl since the beginning of 2014, reflecting expectations of an even weaker currency.

By contrast, foreign currency deposits have increased by over $2b in the past six months, the largest semiannual rise in the past decade.

“Local currency deposit growth has slowed to a crawl since the beginning of the year, likely as a result of a shift out of SGD deposits, and into foreign currencies and higher-yielding assets. With only a modest slowing in credit growth, the fall in local currency deposit growth is pushing the loan-to-deposit ratio to decade highs, suggesting increasingly tight domestic bank liquidity,” stated JP Morgan.