The Singapore dollar has begun the week cautiously.
Against the US dollar, having risen on Friday to a one-year high of 0.7493, the currency of Asia’s ‘Lion City’ conceded some ground on Monday and Tuesday, with SGD/USD falling back below 0.745. A retreat in the pair was likely given last week’s approach to major technical resistance at 0.75 and Hurricane Irma’s last-minute detour which thankfully spared the US from a worst-case impact.
0.75 remains a monster of a resistance level in SGD/USD and holders of Singapore dollars will welcome its demise.
With another attack on 0.75 possibly out of reach today, Wednesday 13th, the catalyst for one might come on Thursday in the form of US CPI data. All eyes will be on the data given inflation’s importance to Federal Reserve decision making and consequently to the US dollar. The US inflation outlook has taken a turn for the worse in 2017 and is one of the major factors in SGD/USD’s 7.5% rise this year. Remarkably, month-on-month CPI prints have fallen below economist estimates for the last five consecutive months.
Against the Japanese yen, the Singapore dollar rose on Wednesday morning to a six-week high of 81.88. The yen had been sold widely on Tuesday – enough to make it the worst performing G10 currency – as risk aversion eased.
Against the British pound, the Singapore dollar has fallen sharply in recent days. The Friday-to-Tuesday decline in SGD/GBP to levels close to 0.558 wiped out much of the good work done by Singapore’s currency in August.
Sterling has been strong over the past fortnight and benefitted further on Tuesday from the passing of the British government’s Brexit repeal bill and a higher than expected inflation reading. The Office for National Statistics said on Tuesday that consumer prices in the UK rose in the year to August by 2.9% – up from 2.6% previously and above the market forecast of 2.8%.
Against the euro, the Singapore dollar has been unwavering throughout the first half of September.
Unlike the Chinese yuan, Japanese yen and Korean won, which have all fallen against the euro over the past five-to-ten trading days, the Singapore dollar is up marginally. Volatility in SGD/EUR has dried up however, as has investor interest, as the rate continues to drift sideways along the 0.62 handle. A break above 0.6225 or below 0.618 is necessary to spark life into this exchange rate again.
On a year-to-date basis, unlike its 2017 performances against the dollar, yen and pound, against which it has gained or remains flat, the Singapore dollar has struggled against the euro.
The single currency has been buoyed since the first round of voting in the French presidential election in April, during which it became clear that Emmanuel Macron would defeat populist leader Marine Le Pen and thereby ensure the European Union’s survival. SGD/EUR is down 8.2% since April 17th.
SGD/EUR has also suffered in the face of euro-supportive speculation over future ECB monetary policy. On this subject, market commentators have more to chew on after last Thursday’s ECB press conference, at which the bank’s president, Mario Draghi, told journalists that he and the rest of the Governing Council would begin discussing tapering of the bank’s massive bond-buying program in October.
Author: Joel Wright
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