Bearish forecasts for the Singapore dollar are growing amid expectations that crude oil’s recent tumble will result in looser monetary policy.
The Singapore dollar dropped more than 7 percent against the U.S. dollar over the past six months as the Federal Reserve brought its asset purchase program to an end and appears on course for further weakness given lower oil prices. Deutsche Bank believes it could weaken to S$1.40 this year, a level not seen since July 2010, while Standard Chartered expects it to hit S$1.37; the USD/SGD is currently trading at S$1.33.
Declining inflation will lend a dovish tilt to the central bank’s policy bias this year amid cheaper oil prices, underpinning currency weakness, Deutsche Bank said in a recent report.
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