Bias: The outlook for SGD/CNY is range-bound, as the current rate is slightly below the 90-day average and positioned in the middle of the 3-month range.
Key drivers:
• Rate gap: The Monetary Authority of Singapore has recently adopted a more accommodative monetary stance, while the People's Bank of China continues to support the yuan through liquidity measures.
• Risk/commodities: Oil prices have been relatively stable, which supports both currencies given their economic ties to commodities.
• Macro factor: Government stimulus in China has boosted economic growth projections, reflecting a stronger than expected recovery.
Range: The SGD/CNY pair is likely to hold within its recent range, as external pressures balance out domestic factors influencing both currencies.
What could change it:
• Upside risk: A significant increase in demand for Singaporean exports could lead to a stronger SGD against the CNY.
• Downside risk: Any renewed trade tensions or negative developments in China’s economy could exert downward pressure on the yuan, impacting the SGD/CNY rate.
