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THE key 3-month Sibor or Singapore interbank offered rate has fallen almost 20 per cent from the year's high of 1.027 per cent on April 9.
On Tuesday the 3-month Sibor, which is used to price home loans and other consumer lending, stood at 0.830 per cent.
But this is likely to be a brief respite for home buyers, as economists think the strength of the US dollar is intact, and that when US interest rates are hiked in the second half of this year, as is expected, local interest rates will zip higher again.
Another local interest rate, the 3-month SOR or swap offer rate - typically used to price corporate loans - has fallen even more.
It is down some 32 per cent from the high of 1.132 per cent on March 24.
On May 22, the SOR, which is more volatile, was quoted at 0.767 per cent, which is slightly higher than this month's low of 0.710 per cent on May 18.
The jumps in both the Sibor and SOR from last December to their respective 2015 peaks came on the back of a rally in the greenback, which rose to a high of S$1.39 to US$1 on March 18.
After the Monetary Authority of Singapore (MAS) left monetary policy unchanged in its April review, the SGD recovered somewhat to S$1.32 on April 30. Since then, it has begun retreating again, and was quoted at S$1.35 on Tuesday.
DBS Bank economist Eugene Leow said: "I actually thought that Sibor and SOR were too high for awhile. The recent pullback is probably best thought of as a normalisation from overly high levels."
Referring to the SOR movements, United Overseas Bank rates strategist Victor Yong said the initial correction was driven by the downgrading of expectations over MAS' easing in April.
"Speculative currency positioning drove the initial overshooting and was similarly responsible for the subsequent correction, when MAS kept policy unchanged," he said.
"Domestic funding demand and the expectation that the US Federal Reserve will start their rate normalisation this year will keep SORs supported into the end of the year," he said.
UOB's year end 3-month SOR is at 1.40 per cent, and Sibor is at 1.30 per cent. The bank's year-end USD/SGD forecast is 1.40, Mr Yong said.
OCBC Bank's Selena Ling said US Fed chair Janet Yellen is still reiterating that a liftoff later this year is likely, so the weak USD may not last past the summer.
Last Friday, Ms Yellen said she expects to hike interest rates "at some point this year".
"We are still keeping our year-end 3-month Sibor 1.35 per cent forecast for now," said Ms Ling.