SGD is the second best performing currency – only behind HKD that recently strengthened off lower end of the trading band 7.85 - against USD among 12 Asian currencies so far this year. USDSGD has also had the biggest weekly sell off in seven years last week declining 2.5% on the back of broad based US dollar weakness with falling treasury yield post softer than expected US CPI.
One year forward rate of USDSGD implies 0.85% yield that seems to be less attractive relative to other major pairs with higher returns - EURUSD 2.5%, USDJPY 5% - as S$NEER still well bid near the upper band limit as MAS tightened monetary policy for the fifth time last month while today non oil domestic exports fell -5.6%the most since November 2019 with YoY China trade shrinking 32%.
USDSGD has fallen 5.3% from this year’s high near 1.45 and looks to have found some support forming triple bottom at 1.3666 that coincides with previous swing lows at the end of May and mid Aug. This level also corresponds to uptrend (from Jun 2021 low) and Fibonacci 61.8% retracement level (2021 low and 2022 high) so while further downside momentum is still likely towards next key level 1.34 if the current risk-on sentiment continues, near term reversal of the recent sharp sell off could also cannot be ruled out on any Ukraine-Russia geopolitical escalations.