The SGD to JPY exchange rate shows a bullish bias, with current pricing near 122.7, significantly higher than its three-month average. Key drivers include the interest rate differential, as the Bank of Japan has recently raised rates while Singapore's monetary policy remains accommodative. Additionally, Japan's strong defense budget and improving business sentiment may support the yen. However, rising U.S. Treasury yields are maintaining upward pressure on USD/JPY levels.
In the near term, the SGD/JPY is expected to trade within a range that reflects steady demand for the Singapore dollar against a backdrop of previous volatility and high oil prices, which could affect the yen's stability given Japan's oil import reliance.
Upside risks include unexpected aggressive actions from the Bank of Japan signaling further rate hikes, while downside risks involve any economic headwinds in Singapore that may impact its growth forecasts or shifts in global risk sentiment.