SGD/JPY Outlook: Slightly positive, but likely to move sideways, as the rate is above its 90-day average yet lacks a strong driver for upward movement.
Key drivers:
• Rate gap: The Monetary Authority of Singapore is maintaining its policy, while the Bank of Japan is tightening its policy, which may support the JPY against the SGD over time.
• Risk/commodities: Oil prices are at recent highs, which can bolster the Japanese economy and strengthen the yen amidst ongoing concerns about inflation and fiscal stability in Japan.
• One macro factor: The MAS's raised inflation forecasts for Singapore may increasingly influence SGD dynamics if inflation pressures persist.
Range: The SGD/JPY is likely to drift within its recent 3-month range as it balances current economic factors.
What could change it:
• Upside risk: A significant improvement in Singapore's economic growth data could increase demand for the SGD.
• Downside risk: Any unexpected intervention from Japanese authorities could provide support for the yen, pushing the SGD lower.
