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As one of the most developed economies in Asia, Singapore’s success is built on an outward-looking growth model driven by exports, foreign investment and international financial flows. A key element in this externally oriented strategy has been the exchange rate policy. This paper looks, among others, at how Singapore’s “ basket, band and crawl” exchange rate regime has helped it to manage short-term currency fluctuations and to redress currency misalignments with underlying economic fundamentals. However, it is the openness of the Singapore economy which also renders it vulnerable to shocks originating abroad – and the present global financial crisis is no exception. As documented in this paper, Singapore has experienced its sharpest economic downturn in over two decades as a result of the crisis. With exports plummeting, business confidence taking a hit and foreign portfolio capital exiting its equity markets, the economy contracted and unemployment climbed up. The crisis has exposed the limitations of Singapore’s pronounced dependence on the external sector, a dependence which arises from a small domestic market marked by sizeable income and wealth inequalities. A more sustainable growth path would entail narrowing these disparities, this paper contends, as well as reducing reliance on industrial-country markets in favour of strengthened regional economic ties. For Countries Other than Malaysia: SGD4.90