Can the SGD continue its remarkable rally versus the greenback?

It might be short-lived, say analysts.

The Singapore dollar has gained lost ground against the greenback in recent weeks, following a series of better-than-expected economic data releases.

Analysts note that the SGD has strengthened to the upper half of the S$NEER band as first-quarter economic data showed that local economy might not be as bad as expected.

“[The] USD/SGD broke below the psychological 1.34 level on Friday afternoon to close at 1.3315. The move down was triggered by a better-than-expected Industrial Production number reported for March. This is the third number in a series of stronger-than-expected data released in the last two weeks which has led to a sell-down of the Dollar Sing from as high at 1.375 in the middle of April,” stated Nicholas Teo, analyst at CMC Markets.

Bank of America Merrill Lynch analyst Hak Bin Chua noted that the downside surprises to US data have also contributed to the rally, as the timing of the Fed rate hike is deferred.

However, Chua and Teo noted that the SGD’s continued rally is dependent on the upcoming releases of data from the US.

“Looking ahead for the week – in the absence of fresh indicators and data from the domestic front – we may see influence on the Dollar Sing come from the US, in particular from Wednesday’s GDP release and from the FOMC announcement on Thursday,” Teo noted.

“The S$NEER has crossed the mid-point this week, after trading below the mid-point since the start of 2015. The SGD strength may be short-lived however if our US GDP 2Q rebound view (to +3.5%) is right. We continue to believe that the Fed remains on track to hike later this year, although the outlook of late has been foggy. In our view, the FOMC will likely reiterate its data-dependent stance next week, indicating that interest rate hikes will remain on the table in upcoming meetings,” added Chua.