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Sibor, SOR up ahead of Fed decision
LOCAL interest rates rose on Wednesday a day before the US Federal Reserve makes its last interest rate announcement for the year.
The key three-month Sibor (Singapore interbank offered rate), typically used to price home loans rose to 0.932 per cent, up 0.006 from 0.926 per cent on Tuesday. The latest move brings the three-month Sibor back to where the interest rate was in early July. The high in 2016 was 1.254 per cent on Jan 19.
The three-month SOR (swap offer rate) moved a faster 0.062 to 0.818 per cent on Tuesday from 0.756 per cent on Monday. The three-month SOR, a benchmark for commercial loans is updated late at night.
Eugene Leow, DBS Bank interest rate strategist, thinks the upward moves of the local interest rates is "prepping ahead of the Fed decision".
A 25 basis points US interest rate hike by the US Fed is fully priced in, and is not a major factor in local interest rates movements, said Victor Yong, United Overseas Bank interest rate strategist.
"The primary driver for local interest rates' uptick is seasonal, the time of year when market liquidity is thinning, people are on Christmas break, or tidying up the books before closing for the year," said Mr Yong.
"The charts of the past five years make a low in early December and then start to tick up towards the end," he said.
On tonight's US Fed announcement, Mr Yong said markets will be looking out for any hint from US Fed chair Janet Yellen to see if she might allude to a greater willingness to hike rates faster in 2017.
The current expectation is for between 2-4 hikes in 2017.
UOB is expecting three hikes and sees the Fed Fund rate end 2017 at 1.50 per cent from 0.50 per cent now, Mr Yong said.
UOB's forecast for the three-month Sibor and SOR rates is to end 2017 at 1.35 per cent.
As for the SGD, it could fall to S$1.48 against the USD by end-2017 as the USD benefits from the incoming US president's tax reforms and reflationary policies, he said. On Wednesday the SGD was quoted at S$1.42 against the USD.