Post-MPS SGD rally will be short-lived, say analysts

The USD/SGD will still end 2015 at 1.40.

The SGD’s rally versus the greenback immediately after the Monetary Authority of Singapore (MAS) released its schedule Monetary Policy Statement will just be a short-lived reprieve, according to analysts.

Bank of America Merrill Lynch analyst Rohit Garg noted that the knee-jerk reaction in rates is purely due to the headline price action of USDSGD and some unwinding of paid positions.

Garg further noted that the market will still expect market to continue pricing in some form of an easing in the future. 

“Moreover, we think USDSGD will catch up with the broad dollar strength (recently USDSGD has lagged the move in DXY). Consequently, forwards will also gradually trend higher which should in turn drag rates higher in the medium term,” he stated.

UOB analysts Francis Tan and Jimmy Koh added that the USD/SGD will end 2015 at 1.40 despite the sell-down after the MPS. 

“Within a minute from the release of the monetary statement at 8am, the USD/SGD was sold down from the 1.3737 level to the 1.3607 level, representing almost a 1% decline. We continue to expect the US interest rate normalization to start in the June FOMC and we maintain our forecast of the USD/SGD to end 2015 at 1.40,” they wrote.