Singapore Dollar Defies the Authorities

UOB Bank Exchange Rate Forecast 1

The Monetary Authority of Singapore introduced measures to weaken its currency, however, just over one week later and the losses suffered from that decision have almost all been reclaimed, at least in most pairs

Despite an attempt to weaken its currency and help its struggling export-led economy the Monetary Authority of Singapore (MAS) appears to have failed.

The currency is now even stronger against the US dollar and the euro than when the MAS moved the Singapore dollar’s Nominal Effective Exchange Rate (NEER) to a 'neutral appreciation slope'.

Although it spiked higher following the announcement, it had given up those gains on Friday April 22 -  only eight days later.  

This also went against analysts at Singapore Bank UOB’s expectations that the pair would continuing appreciating up to 1.3740.

The currency has strengthened versus the euro, despite falling temporarily, with one euro buying you 1.5230 Singapore Dollars at the time of writing compared to the 1.5350s following the statement.

The pound appears to be the exception to the rule, as it has strengthened slightly versus the SGD, however, this is because the pound has strengthened across the board due to lessening Brexit fears after a recent poll showed UK voters were less likely to vote to leave the EU.

Nevertheless, UOB’s forecast for GBP/SGD appeared to be accurate, as it correctly predicted fierce resistance to further upside at 1.9350, and the pair has struggled to break above there, although on Friday is has finally moved higher, reaching 1.9368 at the time of writing. 

Current Forecasts and Outlook

The chart shows GBP/SGD has corrected back in a down-trend. It has broken above the trend-line, which is a bullish sign and probably has higher to go.

Although a continuation of the current fledgling correction higher, up to the 50-day Moving Average at 1.9526, is possible, it’s not a conviction call.

If it reaches that high gains could be capped by tough resistance at and around that level.

A break of the April lows would be required to confirm a resumption of the down-trend.

Querk Ser Leang, analyst at UOB, highlights the 1.9350 resistance level as key:

“As long 1.9350 continues to cap, the risk appears to be greater on the downside. Expected range; 1.9190/1.9305.”

The UOB analyst’s 1-3 week outlook is similar to ours although once again the importance of the 1.9350 hurdle as requiring to be overcome for more upside to flourish is highlighted, whilst a breakl of the April lows is required to provide the impetus for more bearish action.