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Euro resumes slide against Singapore dollar: DBS analysts
DBS analysts are expecting the euro to keep underperforming against the Singapore dollar, according to a research note released by the bank on Thursday.
"Having broken its 1.52 support in September, EUR-SGD is looking to fall below the psychological support at 1.50. With the Fed having completed its mid-cycle adjustment after its third rate cut in October, EUR-USD is also vulnerable around 1.10," said DBS strategists Philip Wee and Duncan Tan.
Unlike Singapore, Germany is not expected to avert a technical recession, the analysts said.
"Consensus expects Germany's GDP (gross domestic product) growth to come in at -0.1 per cent quarter on quarter based on the saar (seasonally adjusted annual rate) in Q3, the same negative reading as the previous quarter."
Conversely, Singapore's growth improved to +0.6 per cent from -2.7 per cent for the comparable periods.
In addition, the strategists noted that monetary policy easing in Singapore has been milder than in the eurozone.
"The SGD policy band is still on an appreciation path, despite the slight flattening in its slope last month," they said.
Meanwhile, the European Central Bank (ECB) has not only pushed its deposit facility rate deeper into negative territory in September, but also restarted its asset purchases programme this month.
"The attractiveness of the SGD over the EUR is best reflected by a positive 10-year SGS (Singapore government securities) yield just below the ECB's 2 per cent inflation target, versus its negative yielding European Union counterpart," said Mr Wee and Mr Tan.
Nonetheless, in the near term, Asia's low yielders (which includes Singapore, South Korea and Thailand), could continue to be vulnerable, while mid (Malaysia, China and the Philippines) and high yielders (Indonesia and India) should be comparatively resilient, the analysts added.
"In the current environment, low yielders share a higher degree of co-movement with, and are thus quite exposed to rising core yields (US Treasury bonds/Bund). With economies more sensitive to China growth and global trade/exports cycles, their bonds could sell off further if positive US-China headlines continue to come in.
"At this time, mid yielders and high yielders could offer better risk-reward. Their central banks certainly have greater scope to cut rates," the analysts said.