Bias: The SGD/JPY pair is bullish, positioned above its 90-day average and in the upper half of its 3-month range.
Key drivers:
- Rate gap: The Monetary Authority of Singapore's accommodative stance contrasts with the Bank of Japan's recent tightening, giving SGD a stronger footing against JPY.
- Risk/commodities: Oil prices are currently above average and experiencing volatility, which can help support the SGD due to Singapore's economic links with commodities.
- Inflation trends: Japan's easing inflation may lead to less aggressive monetary policy adjustments by the BoJ, affecting the yen's value.
Range: The SGD/JPY is likely to hold steady within its recent range, with potential for slight upward drift as factors play out.
What could change it:
- Upside risk: Further rate hikes from the BoJ could strengthen the JPY against the SGD.
- Downside risk: A significant decline in oil prices may weaken the SGD's position.