Singapore dollar rally continues on profit taking

THE Singapore dollar continued to rebound on Thursday in line with other currencies, reaching S$1.43 as US dollar profit taking gathers momentum.

At S$1.43, the Sing dollar is up 1.4 per cent from the low of S$1.45 on Tuesday, said Philip Wee, DBS Bank senior currency strategist.

The US dollar has been struggling since the waning days of 2016, and the profit taking is taking place across the board, he said.

"The whole rally has been on Trump growth and interest rates and Fed hikes . . . the position has been pretty extended," said Mr Wee.

The US Federal Reserve raised interest rates last month, and expectations are for three more hikes in 2017.

The US dollar and stock markets have rallied strongly since Donald Trump won the US presidential election on Nov 8 on reflation hopes but the rallies are also based on data which shows that the US economy is growing nicely. Mr Trump takes office on Jan 20.

The market is also seeing more numbers coming out which show that other economies are not doing too badly, for example Singapore's latest growth data, said Mr Wee.

On Tuesday, Singapore surprised with 1.8 per cent growth in 2016, surpassing even the government's own 1-1.5 per cent range estimate.

"There's a balancing effect right now, I would say the market is evaluating - it's not so one-sided, the rest of the world is tagging along," said Mr Wee.

The Singapore dollar has had a fantastic 24 hours, with the US dollar falling against it from 1.4500 to 1.4320, said Jeffrey Halley, Oanda senior market analyst.

"In the process, breaking support around 1.4430 and 1.4350 - these now become resistance. Support is at 1.4320 and then 1.4270 and 1.4220," said Mr Halley.

Mr Wee said that the broad trend of further US dollar strength has not changed, or at least it is too early to confirm if it is something deeper. "The US optimism is high."