S$ falls to fresh six-year low against US$ on global growth concerns

Singapore

THE Singapore dollar (SGD) fell through S$1.43 on Tuesday morning, to a fresh six-year low, on increased concerns over global growth.

It recovered somewhat in the afternoon, and was S$1.4287 at 5.53pm.

The SGD has fallen for seven consecutive days and touched a morning low of S$1.4335. Year to date, the SGD is down about 7.4 per cent.

The USD/SGD finally broke above the 1.43-handle on Tuesday morning, bolstered by global growth concerns, said a Maybank Research note.

"With the 1.43-handle broken, the next key barrier is around 1.4460 (Aug 24, 2009 high). In the interim, 1.4400 should be the handle to cross," it added. "Though the risk has tilted a little more to a Monetary Authority of Singapore (MAS) move at its October meeting, our base-line scenario is for the MAS to hold for now."

DBS Bank economists now expect an easing in Singapore's monetary policy come October, via a recentring of the S$NEER (Singapore dollar nominal effective exchange rate).

In a research note on Monday, DBS said it foresees the band being recentred lower by half a band. "This is equivalent to a one-off devaluation of 2 per cent," it noted.

"The USD/SGD has appreciated back above 1.42 after it corrected down to 1.3879 on Sept 17 from its previous peak of 1.4294 on Sept 8. According to our model, the USD/SGD should not deviate far from the ceiling of its implied policy band, currently located around 1.4370," the report added.

Earlier this month, MAS cautioned that both headline and core inflation would come in at the lower half of their 2015 forecast ranges, of minus 0.5-0.5 per cent and 0.5-1.5 per cent, respectively.

United Overseas Bank said that on Tuesday morning, the S$NEER index dipped further to 1.15 per cent below the midpoint, from around -1 per cent on Monday. The S$ index is seen hovering within the -0.5 per cent to -1.5 per cent range below the midpoint, which implies a USD/SGD range of 1.4196-1.4340.