Currency Briefing - what you need to know for Mon May 14, 2012

Holding steady against the US dollar, the local currency is trading at $1.2513.

IG Markets Singapore said:

The Singapore starts a new week holding steady against the greenback although it still sits above the $1.25 threshold.

Greek political uncertainty continues to be a concern for global traders and is making them very risk-averse. With another election likely to happen next month this uncertainty will remain for the coming weeks.

European policy makers are gearing up for Greece’s exit from the eurozone showing how real a threat this is. In the meantime, traders are heading to the safe havens of the US dollar while shunning riskier Asian currencies like the Singapore dollar.

The local currency is trading at $1.2513 and will struggle to break through the $1.25 floor with so much caution in the markets. The one positive factor for Asia has been China’s cut in its required ratio over the weekend.

GFT meanwhile noted (for 11 May 2012 trading):

We have seen very little consistency in the performance of the U.S. dollar which is unchanged against the EUR, JPY and CHF, higher against the GBP and AUD and lower against the CAD and NZD.

Although stock futures are pointing to a lower open, currencies are struggling to hold onto their gains against the dollar following much weaker than expected Chinese data.

For any skeptics questioning the validity of the Federal Reserve's dovishness, the latest inflation report provides solid evidence for why easy monetary policy is still needed. Not only has job growth in the U.S. slowed but producer prices fell 0.2 percent in the month of April.

Excluding food and energy costs, PPI increased but still at a slower pace than the previous month. Core prices may be more important to central bankers, but the trend of headline inflation cannot be ignored.

With the U.S. dollar strengthening and commodity prices ticking lower over the past month, there is a reasonable chance that lower PPI could translate into lower CPI.