FX : USDSGD, The Time Has Come

I have always associated the strength of a country’s capital markets with the interest in and strength of its currency. It is not a short term view but a part of my big picture attempt.

Thus it should be no surprise that the period of SGD strengthening from 1.40 to its low of 1.19 between 2010 and 2011 also coincided with its bond issuance record years, SGD 36 bio in 2010 and SGD 30 bio in 2011.

We then moved into a consolidatory pattern for the USDSGD between 2012 till now, trading between 1.2 and 1.3.

Interest in the currency has diminished and I say this as I prepare some data ahead of my AUD bonds piece to illustrate the rising investment trend in Australia as compared to waning investment interest in Singapore.

2010 was a boom year for Singapore with sentiments rising into 2011 which was less of sure thing based on the non oil domestic exports which tapered into a lull period since.

non oil domestic exports singapore

Yes. We know that the exports are not that important to Singapore anymore, services and finance are their key growth initiatives.

Internally, industrial production numbers have been on the weak side, inflation is not seen as a problem and the government is on a economic restructuring warpath.

Externally, we have the neighbours reviving from life support mode – Indonesia back on track, Malaysia back in favour and Thailand under martial law. Meanwhile India has become a new investment darling and Australia’s capital markets are heating up.

What does that bode for Singapore ?

Nothing much and the SGD is right smack in the mid point of the NEER band, trading at the 50 day moving average line.

The time has come for the SGD weaken.  In the weeks ahead I expect 1.2620 as a near term target, following which 1.28 will be challenged.

usdsgd

We have come to a crowded price in the SGDMYR at 2.5675 as well and there should be little resistance to a fall towards 2.55 then 2.52.

sgdmyr

This has been an extremely uninspiring period for the markets with the end of a period of anxiety during all the elections we have had globally. The central banks are in their cruise control modes and there is plenty of uninvested cash lying around.

But it is hard to see that all that money rushing to Singapore dollars even if they all bank with us.

 

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