Bias: The HKD/SGD pair is currently range-bound, as it sits just below the 90-day average and within the middle portion of the 3-month range.
Key drivers:
• Rate gap: The significant interest rate differential between Hong Kong's near-zero rates and the higher rates in the U.S. is pressuring the HKD.
• Risk/commodities: Fluctuating oil prices directly impact imports and trade costs for both currencies, influencing the HKD and SGD.
• One macro factor: Singapore's projected core inflation decrease indicates a more accommodating monetary policy, which may affect SGD strength.
Range: The pair is likely to remain stable, showing little movement beyond the recent range.
What could change it:
• Upside risk: A rebound in Hong Kong's capital inflows could strengthen the HKD against the SGD.
• Downside risk: Continued softness in Hong Kong's economic indicators may lead to further HKD weakness versus SGD.