FX Musings : Expecting An Unanimous MAS Monetary Policy Statement




A recalcitrant thought after this month’s Bank of Japan meeting and the FOMC, is why not just subcontract our central banking jobs to them for a while ?

If the Fed hikes, it is just as good as a rate cut for the rest of the world. Let’s leave it to hem to decide as we focus on cleaning up our houses and books as Philippine’s new president Duterte has officially killed over 3,000 suspected drug traffickers and “would be “happy to slaughter” 3 million drug addicts”, with the blessings of his population after his election victory earlier this year, just as long as, I suppose, he does not instate himself as another Marcos.

Yet it would be a new chapter in the history of Asean given the relatively short independence of the founding member nations – Indonesia (1945, 71 years), Malaysia (1957, 59 years), Singapore (1965, 51 years), Thailand (democracy in 1939, 77 years) and Philippines (1946, 70 years).

My take is that it still looks like trouble for Asean especially when global funds grow bored and decide that President Duterte has killed enough people and we have Malaysia on a potentially early election, riding on the wave of election and referendum fatigue, taking on newly founded Bersatu party consisting of the incredible or uncredible union of former national leaders, Dr Mahatir and his former nemesis, Dr Anwar Ibrahim ? To pull a Duterte ?

The MAS Semi Annual SGD Monetary Policy Statement

Going into Singapore monetary policy fortnight, we would be expecting the announcement anytime between 10-14 Oct.

2 consecutive easings since the out-of-the-blue move inter-meeting move on 28 Jan 2015 to reduce the slope of appreciation that caused a market tantrum, have been relatively mild and half hearted – once for a slight reduction in slope in Oct 2015 and a change of stance to zero appreciation in April this year (for the first time since 2009).

Yet  I would peg a 20% chance of easing against 80% for unchanged as Singapore’s SG51 just passed us and we are going into a new phase of the Singapore Story as Deputy Prime Minister Tharman tells us “Prepare to ride change, be part of it”, and that he cannot categorically be prime minister (for a million dollars more in pay).

It just says that MAS would stay put in the meantime because there is no sense in meddling with a foreseeable future but it does not mean that the USDSGD will stay pat at these levels.

Onshore and Offshore Uncertainty

  1. MAS has her hands full manning her helpline* with the local corporate bond market in jeopardy with more than half dozen local corporates in the midst of bargaining with bond investors for payment leniency, extensions, in other words, defaulting.
    *note” MAS helpdesk” is  first suggestion on Google Search when you type “MAS”
  2. The local real estate market showing cracks as home prices slide by most in more than 7 years, backlog of homes expected to take another 3 years to clear.
  3. Unemployment rate on the rise with degree holders rising to the highest level since 2009 with sustained increases (5 quarters straight) in unemployment among residents aged 50 and above.
  4. Say what of Duterte and Bersatu ? The South China Sea spat and the US Presidential elections on 8 Nov .. Italian referendum .. then Brexit in March 2017 ?

No Bullish Expectations

We can say this round, the view is pretty unanimous – it’s Nothing or Ease views ! Depressing enough, yet no sane or respectable strategist would make that heroic call for a hike which in Singapore’s context means a stronger SGD vs the NEER basket and possibly lower rates (not higher rates as a hike implies).

I put the odds at 80-20% (Nothing vs Ease).

In the grander scheme of things, the SGD has been trading on the strong side of the NEER and even if a Nothing Outcome emerges, there could be weakness ahead.

Thus, a suggestion to position for a weaker SGD would be via the SGDCNH instead of the USDSGD, noting that China is Singapore’s biggest trading partner and observing the SGDCNH has been closely tracking the NEER Index. And the better reason that CNY officially entered the IMF’s SDR basket on 1st October, cementing its status as a reserve currency.


FX Musings : An Unanimous MAS Monetary Policy Statement


Why not ? For a 4.75 target ?



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