USDSGD has, errr, apparently bursted out of its trading band if the home made computations are correct, causing the market to freak out.

You see, the SGD is not meant to weaken so much because it is, afterall, pegged to the NEER basket which is heavy on USD and USD is outperforming.

sgd neer

Well, we are seeing SGDPHP at its lowest in 5 years today as all the regionals strengthen against the Singapore except for the ringgit and it does not look good.

Month to date against the SGD dollar, we note the CNY, USD, HKD and gang outperforming.

wcrs 10 mar 15

It is indeed a conundrum because the SGD dollar should lift along as logical investors would have it.

But we are in a new world now. A mercenary world that is driven by profits and the SGD does not look like a good investment at the moment which is another conundrum because SGD is still on an appreciating stance albeit a slower one. Besides, India has cut rates twice and the Rupee has strengthened.

(Bloomberg) — Lawrence Wong, member of board of Monetary Authority of Singapore, says in Parliament Tuesday.
* Singapore NEER band not on depreciation path: Wong
* Singapore NEER band on modest and gradual appreciation path: Wong
* Excessive weakening of currency could lead to higher inflation: Wong

I guess MAS does not have many options if this continues to wear on because our foreign reserves have fallen pretty quickly last year and there is not that much in the battle chest to combat the Q€ jihad, as Retired Trader (an old friend) puts it.

Given that the ECB just started their bond buying yesterday, I would not expect it is prudent to fight the first wave when more are to come especially when we have the EUR weakening almost a percentage point a day against the USD.

Moral suasion does not seem to be working too, calling all the friendly hedge funds and mutual funds or even central banks ?

Re-centreing the band is the only viable option but the next monetary policy meeting is a month away and another surprise inter-meeting announcement would only serve to show a weak hand to the market.

I must admit, this is the first time in a long time where it looks bleak and permanently so, unlike all the temporary bouts of weakness we have seen in the past.

It even brings to mind those images of Korean housewives donating their gold back in 1998 to save their country.

Hang in there.