SGD Most Precarious Asian Currency Vis a Vis Rising US Rates

Singapore’s dollar has emerged as Asia’s most-vulnerable currency to prospects of higher U.S. interest rates, driving a gauge measuring the relationship to a record high.

The CHART OF THE DAY tracks the Singapore dollar and the benchmark U.S. 10-year yield since April 1995. The lower panel shows the 240-day correlation between the currency and Treasury rate climbed to about 0.4 last week, the highest in data going back to 1981. The link between the two is the strongest in Asia, excluding the Chinese and Japanese currencies, on a weekly basis, the data show. The Monetary Authority of Singapore, which manages the local dollar against an undisclosed basket of its peers, said today it will maintain a modest and gradual appreciation of the currency.

“As we progress into the second half of this year, and into 2015, a higher yield environment is something that will cap Singapore dollar strength for sure,” said Jonathan Cavenagh, a currency strategist in the island state at Westpac Banking Corp. “The market should be more confident that the U.S. economy is on a firmer footing by that stage.”


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Mingze Wu

Mingze Wu

Currency Analyst at Market Pulse
Based in Singapore, Mingze Wu focuses on trading strategies and technical and fundamental analysis of major currency pairs. He has extensive trading experience across different asset classes and is well-versed in global market fundamentals. In addition to contributing articles to MarketPulseFX, Mingze centers on forex and macro-economic trends impacting the Asia Pacific region.
Mingze Wu