AN ANALYSIS OF THE SINGAPORE-US EXCHANGE RATE : 1975-1990

Abstract

The Singapore financial market has grown rapidly especially in the recent years. By 1988, she was already the world's fourth largest exchange market. Such outstanding achievement must have drawn the interest of many academics. However, very few studies were conducted on the efficiency of this market. This academic exercise analyses the behaviour of the Singapore-US exchange rate. This exchange rate is chosen because it generates the highest turnover and is the most heavily traded among all the currencies in the Singapore foreign exchange market. The key topics of this analysis are the efficient market hypothesis, test of random walk process on the spot exchange rate and the uncovered interest parity. These three areas of study are chosen because their results will reflect the efficiency of the Singapore foreign exchange market. This is by far the most comprehensive treatment of the Singapore-US exchange rate over the period January 1975 to December 1990. Both econometric and times series analysis will be employed to examine the various relationships. The results obtained are supportive of the efficient market hypothesis.