Singapore dollar under selling pressure

Singapore dollar under selling pressure
By Thomas Cho |
Posted: 05 February 2013 2252 hrs

 

 

 
 
 

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Singapore dollar under selling pressure

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SINGAPORE: The Singapore dollar has been under selling pressure in recent days.

Against the US dollar, the currency has lost some 1.2 per cent since the beginning of the year.

Pressure has been piling against the Singapore dollar as analysts see an improved risk appetite amongst investors in emerging Asian currencies.

The Singapore dollar was one of the top performing currencies compared to the US dollar in 2012, second only to the South Korean won.

But this year, the currency has lost some of its shine, to depreciate some 3.8 per cent against the euro.

It also dipped over one per cent against the Chinese yuan since the beginning of 2013.

Some traders attributed the Singapore dollar’s recent strength against the weakening Japanese yen to its new Prime Minister Shinzo Abe.

The Japanese yen has depreciated 6.6 per cent against the US dollar in just over a month.

Philip Wee, senior currency economist at DBS Bank said: “I guess this has given rise to worries about currency war but at this stage, I would say it is best to wait for the G20 meeting next week, where there will be more clarity in terms where most countries stand – emerging market and the G7 in terms in how they view the Japanese yen.”

Over the last three months on a one-year comparison, DBS believes the Singapore dollar appreciated some four per cent against a trade weighted basket of currencies.

But strategists expect the Singapore dollar to remain relatively stable going forward.

The Monetary Authority of Singapore allows the Singapore dollar to float within an undisclosed bandwidth of a central parity against a concealed basket of currencies of Singapore’s major trading partners and competitors.

Other analysts believe the Singapore dollar’s temporary weakness is due to the improved economic outlook in the US and eurozone economies.

Thio Chin Loo, senior FX and IR strategist in Asia at BNP Paribas said: “There has been some rotations generally away from emerging market investments to developed market investments largely because the growth rebound in the US and eurozone are sharper than the continued growth outlook for Asian economies.”

Traders are bracing for the US dollar to weaken against the Singapore dollar and other Asian currencies, as the upcoming US spending sequestration could add further woes to the US economy.

“We expect that to eat into government expenditure in the US,” said Bob Ryan, director of markets strategy, Asia Pacific, at the Royal Bank of Scotland.

Strategists expect the US Federal Reserve to continue its loose monetary policy, which will boost Asian currencies.

Some analysts believe the Singapore dollar will continue to underperform its regional peers, given the city-state’s slowing economy.

- CNA/xq

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Singapore dollar under selling pressure