Forex Focus : The Fair Value of USDSGD

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USDSGD is at a 2 year high, breaking the 1.30 level that was not seen since the last week of 2011.

USDSGD Weekly Candle Chart

USDSGD Weekly Candle Chart


It does not matter that the DXY USD Index is at a 5 year high, USDJPY is at a 7 year high,  EURUSD is at 2 year low, folks are now calling for 1.32 as the next chart target.

It may or may not be true especially if we are going to assume that the USDJPY will be at 120 by Christmas because 1 yen a day, drives the BoJ away ?

You see, it is possible to estimate the fair value of the USDSGD because of the MAS publishes their SGD Neer index at the end of each week, subject to a 2 week lag.$NEERnov14.pdf

This is based off 100 on Jan 1999 when USDSGD was at 1.6535 on the 1st of January which means the last reading as at 31 October 2014 of 122.81 should give us USDSGD at 1.2763 versus its actual close of 1.2855.

I am not here to give a lesson on Singapore’s managed float system which is the closest to China’s as we can get or should I say which China took to because I think Singapore had this going on for a longer time (since it was formalised back in 2004).

The beauty of our SGD NEER policy is that we can be assure of constant appreciation as long as inflation exists. And higher inflation in Singapore really leads to lower interest rates, giving us reason to cheer unlike our neighbours.

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