Singapore Dollar Gains, USD/SGD Falls as MAS Surprises with Tightening. Now What?

Singapore Greenback, USD/SGD, Financial Authority of Singapore, MAS, GDP – Market Alert

  • Singapore Greenback good points as MAS unexpectedly tightens financial coverage
  • Focus for USD/SGD could shift again to exterior dangers, rising markets
  • Broader uptrend nonetheless holds for USD/SGD, eyes are on key assist factors

The Singapore Greenback rose in opposition to the US Greenback, sending USD/SGD decrease after the Financial Authority of Singapore (MAS) surprising tightened coverage at its biannual assembly. The MAS did this by barely rising the slope of its forex band. Singapore’s central financial institution is exclusive in that as an alternative of managing benchmark lending charges, it oversees change charges. That is because of the city-state’s heavy reliance on commerce.

That leaves Singapore probably weak to rising exterior worth pressures, lately pushed by rising power costs and supply-chain disruptions. Nearly no economists polled by Bloomberg anticipated tightening right now. Due to slim tightening expectations, the Singapore Greenback had a very unstable response to the announcement, sending USD/SGD decrease as a lot as 0.3%.

The MAS famous that this tightening will assist guarantee worth stability over the medium time period because it sees core inflation near 2% within the medium time period. It additionally largely dropped the accommodative language from the earlier assertion in April. Blended third quarter GDP knowledge additionally crossed the wires. The financial system expanded 6.5% y/y versus 6.6% anticipated. Quarter-over-quarter progress was softer, at 0.8% versus 1.1% seen.

The Singapore Greenback can at instances be delicate to danger urge for food, particularly round Rising Markets. On the chart under, I’ve highlighted the usually damaging correlation between USD/SGD and the MSCI Rising Markets Index (EEM). This leaves the Singapore Greenback notably weak within the wake of what’s anticipated to be Fed tapering beginning as early as maybe November. If rising Treasury yields come again into play, the Singapore Greenback dangers relinquishing a few of the good points witnessed right now.

As we head into the weekend, the main target turns to US retail gross sales and College of Michigan sentiment knowledge on Friday. Whereas knowledge from the US continues to underperform relative to expectations, this has been by an more and more shrinking margin because the center of September. In the meantime, US-China tensions might danger heightening within the coming months because the USTR evaluates actions in opposition to China over its non-compliance with the section one commerce deal. Souring sentiment could rekindle upside USD/SGD momentum.

USD/SGD Vs. MSCI Rising Markets Index

Singapore Dollar Gains, USD/SGD Falls as MAS Surprises with Tightening. Now What?

Chart Created Utilizing TradingView

Singapore Greenback Technical Evaluation

The drop in USD/SGD has introduced it again to the 1.3474 – 1.3502 inflection zone whereas concurrently testing rising assist from Could. As such, the broader uptrend nonetheless stays in play. Furthermore, under the trendline sits the 200-day Easy Transferring Common. The latter might additionally reorient the pair larger. As such, whereas USD/SGD appears to be on the decline within the near-term, the broader path appears to stay centered to the upside. Discovering affirmation of breakouts might be key.

USD/SGD Every day Chart

Singapore Dollar Gains, USD/SGD Falls as MAS Surprises with Tightening. Now What?

Chart Created Utilizing TradingView

— Written by Daniel Dubrovsky, Strategist for DailyFX.com

To contact Daniel, use the feedback part under or @ddubrovskyFX on Twitter


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