In spite of robust economic data, the Singapore dollar weakened on Friday to 1.354 per US dollar and to 1.604 per euro, from 1.3515 and 1.5992 respectively.
Singapore’s Ministry of Trade and Industry (MTI) said on Friday that preliminary GDP for the third quarter grew by an impressive 6.3%; nearly twice the market forecast of 3.2%. The data took annualized growth in the year to September to 4.6% – the highest rate of annual growth since 2014 and a considerable jump from 2.9% previously.
Traders be warned however, that Friday’s data is a preliminary reading (determined from the first two months of the quarter) and is almost certain to be revised. Furthermore, Singapore’s quarterly GDP numbers are notoriously volatile, having spent much of the past two years swinging from expansion to contraction (from growth to negative growth). To best demonstrate this, we can look to July’s preliminary growth for Q2 of 0.4%, which was revised one month later to contraction of 2.1%. Consider also that February’s remarkable 12.3% growth for Q4 2016 was followed immediately by contraction of 1.3% in Q1.
Regardless, with the service sector making up nearly 70% of Singapore’s economy, the MTI’s sector-specific figures (found here) mark an important turnaround according to analysts at Singapore’s largest bank, DBS.
“The main story behind the GDP numbers is that recovery is broadening out. This can be seen from…the services sector [data]. Most key services segments are now back in expansion mode and higher frequency data such as re-exports, container throughput and financial market turnovers are all trending higher,” said a researcher at the bank.
As for the Singapore dollar, Friday’s weakness does little to offset what has been a decent week for the currency. By 3pm in Singapore, USD/SGD had fallen (the Singapore dollar had strengthened) by 0.8% from last week’s close.
Singapore dollar bulls will now be hoping for another attack on 1.3350 – the major support level in USD/SGD. Previous attempts on the level failed in April, June and August of 2016 and again five weeks ago.
Against the euro, the Singapore dollar has done little since late September. Traders have had to dose-up on anti-boredom medication while watching EUR/SGD drift sideways along the 1.6 handle for much of the past three weeks. August’s EUR/SGD high of 1.6309 remains the point of focus for this rate. A breach of this high would mark the Singapore dollar’s weakest level against the euro for more than two years.
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