The Singapore dollar fell on Friday morning following worse than expected GDP data.
Singapore’s Ministry of Trade and Industry said that the economy expanded 0.4% in the second quarter, which equates to annualized growth of 2.5%. These numbers fell short of the market forecasts for 1.1% and 2.8% for quarterly and annualized growth respectively.
Singapore’s economy performed significantly better in the second quarter than in the first, in which the economy contracted by 1.9%. The annualized growth rate remains as it was three months ago.
Readers should be aware that today’s numbers are preliminary (determined from the first two months of the quarter) and are likely to be revised, especially since Singapore experiences great volatility in its quarterly GDP, which frequently swings from expansion to contraction and back again.
In terms of Singapore’s economic outlook, an analyst from Singapore’s largest bank, DBS, told Bloomberg today that “the latest figures are broadly consistent with our view that the pace of growth could be tepid going forward.” The analyst pointed to a slowdown in China and tighter monetary conditions in the US and Europe as reasons.
Singapore’s currency fell slightly following the data, recovering losses in some cases and adding to them in others.
Against the US dollar, SGD fell by roughly 0.25% to $0.7263 but, as of writing, has recovered to $0.7274. The bigger picture remains strong for SGD; the currency remains up nearly 6% against the greenback since lows posted on January 3rd.
Against the Japanese yen, prior to this morning’s data SGD was buying ¥82.6 but as of writing buys ¥82.36 – a fall of 0.3%. SGD has benefitted over the past month from broad weakness in the yen, and having held above the technical level of ¥82.0 for several days now, it seems likely that there is significant short-term upside potential in SGD/JPY.
Against the Australian dollar, SGD fell today to a three-and-a-half-month low. The Australian dollar has soared since early June, gaining more than 4% against SGD. Those interested in the Australian dollar should also note AUD/USD’s imminent arrival at the major $0.7750-$0.7835 resistance area, which has kept the exchange rate contained since April 2016.
Against the Canadian dollar, SGD did little following GDP but has been hammered since June in light of renewed hawkishness from the Bank of Canada, who hiked interest rates on Wednesday for the first time since 2010. SGD/CAD stands at C$0.9268.
Against the euro, SGD fell and recovered much as it did against the US dollar. The difference being that against the euro, SGD is down 3% on the year. The euro has been in a broad uptrend since April following the positive outcome of the French presidential election and because of an increased likelihood of the ECB tapering its bond-buying program this year. SGD/EUR is at €0.6372.
Upbeat forecasts for the Singapore dollar’s future direction are hard to come by. DBS advised investors today to “remain guarded against expecting more appreciation ahead,” and the team at TradingEconomics.com are predicting weakness in the short and long-term. They predict a fall in the SGD/USD exchange rate to $0.7194 by the end of September, equivalent to a 1% fall from today’s rate. Over a twelve-month horizon, they forecast a fall to $0.6944 – a fall of 4.5%.
Readers can change their money into or from Singapore dollars at exchange rates far better than those available at the high street bank or airport money changer by using BestExchangeRates’ online comparison calculators for SGD travel money and SGD foreign currency transfers.
Author: Joel Wright
You can get in touch with Joel via email here or via the contact page.