MAS Maintains Monetary Policy for SGD – Reaction

The Monetary Authority of Singapore (MAS) decided to maintain current policy band for SGD. Immediate concerns of the MAS appears to be inflationary concern which saw Singapore CPI grew 4.8% YoY.  Majority of Analysts surveyed by Bloomberg and Dow Jones believed that MAS would weaken SGD during today’s policy announcement, and this development caught many by surprise.

USD/SGD H1

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SGD weakened  0.65% against the Greenback immediately on the news release. We’ve broken recent swing low on 5th Oct, showing strong short-term bearish momentum.

USD/SGD Daily

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On the daily chart we could see that USD/SGD is still locked in a downtrend setup. Hindsight is 20/20, and could have indicated to us the inherent bearishness in USD/SGD considering that the rally brought on by MAS easing rumors failed to push price higher than  the low of 1st May. Stochastic is also showing signs of oversold.

Bottomline:

Though the bear trend is strong and does not appear to be stalling, SGD’s strength is coming under scrutiny with GDP shrinking 1.5% in Q3. Furthermore, one must consider broader USD strength globally as Singapore’s economic size is simply not large enough to pull it’s own trend against all the currencies. One must not disregard Euro-Zone crisis which could potentially weaken EUR further, hence strengthening USD and having a spillage effect on SGD as well.

 

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