Macro/FX Watch: Singapore’s MAS could struggle to aid SGD recovery Macro/FX Watch: Singapore’s MAS could struggle to aid SGD recovery Macro/FX Watch: Singapore’s MAS could struggle to aid SGD recovery

Macro/FX Watch: Singapore’s MAS could struggle to aid SGD recovery

Forex 3 minutes to read
Charu Chanana

Head of FX Strategy

Summary:  Singapore’s Monetary Authority announces its policy decision on Friday and would likely keep its policy settings unchanged amid upside risks to inflation and the global higher-for-longer narrative. However, room for SGD appreciation is limited as it trades near the top of the SGD NEER band. Strength in the Singapore dollar will need to wait for a clearer turn in US dollar or a pickup in Chinese yuan.


The Monetary Authority of Singapore (MAS) will announce its next decision on October 13. The MAS policy decision encompasses three aspects – midpoint, slope and width – of the SGD NEER policy band to determine the range in which SGD can trade against a basket of currencies. The last decision in April saw Singapore’s central bank keep all three parameters unchanged after tightening in three separate decisions since April 2022.

Since the April 2023 announcement to keep policy unchanged, the US economic momentum has surprised on the upside and inflation has come down but the 2% target remains elusive. Most global central banks, as a result, continue to stick with the higher-for-longer narrative. Meanwhile, China’s economy continues to remain muddled with property sector woes and uninspiring pickup in consumption. This could mean MAS would have room to keep its policy settings unchanged this week, and maintain the current estimated appreciation of 1.5% per annum in the SGD NEER which brings some level of tightening.

SGD NEER and its estimated trading bands (Morgan Stanley). Source: Bloomberg

Domestically, Singapore’s inflation has eased from a peak of 7.5% YoY in August 2022 to 4.0% YoY in August 2023 but remains higher than pre-covid levels. Upside risks remain from food and energy prices, as well as the GST increase to 9% effective next year. On the growth front, Singapore narrowly escaped a recession after Q2 GDP growth printed +0.1% QoQ after a decline of 0.4% in Q1. But recent PMI and retail sales have surprised to the upside and a services led recovery continues amid post-covid rise in inbound tourism. Manufacturing sector however continues to pose headwinds, together with weakening global growth outlook, which suggests that the next MAS move will likely be that of easing, but it may be too early to get any signals on that yet given the next MAS meeting is in April 2024.

USDSGD has traded higher to 1.3764 amid the strength of the US dollar and the spillovers from a weak yuan. SGD is likely to remain weak as long as the USD strength continues, but a recovery may ensue later this year or next year particularly if China’s stimulus actions bring a recovery in economic momentum. If the MAS stays on hold, SGD should stay supported by room for appreciation is limited as SGD NEER is trading close to the upper band. Technicals suggest USDSGD could rise to 61.8% retracement at 1.3934 before dollar loses steam but a recovery in SGD may ensue if the long dollar positioning starts to be challenged.

Market Takeaway: Limited room for SGD to rally on a hold decision from the MAS as SGD NEER trades near the top of the range.

Source: Bloomberg

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank (Schweiz) AG
The Circle 38
CH-8058
Zürich-Flughafen
Switzerland

Contact Saxo

Select region

Switzerland
Switzerland

All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) Ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law. 

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.