At 2.05pm on Monday (Aug 26, 2024), the Singapore currency was trading at 1.3019 per US dollar. - PHOTO: LIANHE ZAOBAO via The Straits Times/ANN
SINGAPORE (Bloomberg/Reuters): The Singapore dollar advanced to its strongest in almost a decade as traders weighed the difference between the local monetary authority’s relatively hawkish policy outlook compared with that of the US Federal Reserve.
The Singdollar hit levels last seen in 2014 against the greenback late on Aug 23, and fluctuated around 1.30 per US dollar in early trading on Aug 26. At 2.05pm, the Singapore currency was trading at 1.3019 per US dollar.
Singapore’s currency has gained about 1.5 per cent in 2024, the second-best performer in Asia behind Malaysia’s ringgit.
On Aug 23, Fed chairman Jerome Powell all but confirmed that interest rate cuts are coming to the United States in September, speaking at the central bank’s annual symposium in Jackson Hole, Wyoming.
Although Fed officials had sounded increasingly dovish in the lead-up to the Fed’s annual Jackson Hole symposium, Mr Powell on Aug 23 “used stronger language” than his peers when delivering his keynote speech, said Mr Tapas Strickland, head of market economics at National Australia Bank.
“Importantly, there was a notable absence of caveats such as ‘gradual/gradualism’”, effectively keeping the door open to larger rate-cut increments, which “is likely what excited markets”, Mr Strickland said.
The Monetary Authority of Singapore (MAS), which uses the exchange rate as its main monetary policy tool, maintained an appreciating bias for the currency at its July meeting to rein in inflation.
The Singapore Government also upgraded 2024’s growth forecast in July to a range of between 2 per cent and 3 per cent, from an earlier band of 1 per cent to 3 per cent, citing a resilient external demand outlook. An expanding economy may help underpin further currency gains.
“Dollar-Singapore dollar continues to trade with a heavy bias as Powell’s speech at Jackson Hole gave markets greater conviction to sell dollars,” said Mr Christopher Wong, a Singapore-based forex strategist at OCBC Bank.
However, further near-term gains for the Singapore dollar against the greenback may be limited.
The MAS focuses on the currency’s nominal effective exchange rate, referred to as S$Neer, which it allows to move within a policy band. Mr Wong sees the S$Neer trading near the stronger side of its band, suggesting the Singapore dollar’s gains versus the greenback may lag behind those of its peers. - BLOOMBERG, REUTERS
