Breakdown of Singapore’s Foreign Currency Reserves Protected against Exchange Rate Fluctuations and Safeguards to Prevent Excessive Hedging Activity

Parliamentary Question by Assoc Prof Jamus Jerome Lim:

To ask the Prime Minister and Minister for Finance (a) what proportion of Singapore’s reserves invested in foreign currencies is currently hedged, disaggregated by the five main currencies; (b) how has the average cost of US-dollar hedges changed over the past five years; and (c) whether there exist internal thresholds beyond which state investment agencies must cease or scale back such hedging activity.

Parliamentary Reply by Senior Minister of State for Finance, Mr Jeffrey Siow:

Our investment entities, namely GIC and Temasek, invest their portfolios in accordance with their mandates, with the primary objective of achieving sustainable long-term returns. In doing so, they take a holistic view of portfolio risks, including foreign exchange risk, and will take the necessary measures to mitigate these risks. Market pricing for hedging the US dollar to the Singapore dollar has increased steadily over the past five years. These costs are one of several factors that our entities consider when managing their portfolio risk exposures. Decisions on such risk mitigation strategies are made by GIC and Temasek in a dynamic manner, and may vary across asset classes and market conditions. For commercially and market sensitive reasons, they do not disclose details of their hedging positions or internal risk thresholds.