Currency Briefing - what you need to know for Wed March 14, 2012

Recovery signs in American economy helped the US dollar strengthen against the Singapore dollar.

IG Markets Singapore said:

The US dollar has strengthened against the Singapore dollar as the American economy showed more recovery signs pushing QE3 down the agenda. One USD currently buys you $1.26 in the local currency.

There is generally a more upbeat mood towards the global economy with strong US job creation and sales figures, more stability within the eurozone and investors becoming more bullish on the Chinese currency.

Many traders now believe the Chinese yuan will continue to appreciate as the year progresses offering support to Asian currencies and trading partners.

The greenback is trading towards the top of its range against the Singapore dollar, using $1.25 as a key support for forays above the $1.26 mark although there is strong resistance at this level.

The Fed’s Open Market Committee (FOMC) policy meeting last night provided the latest thrust into the $1.26 zone. While a strong US economy is good for riskier currencies it also means quantitative easing is less likely to happen which would flood the market with cheap dollars and devalue the US currency.

Singapore government bonds edged up slightly off the back of an improved economic outlook for Asian markets.

RBS, on the other hand, noted (for 13 March 2012 trading):

The USD was mixed amid a mostly risk-on session. The FOMC Statement, though, helped the USD strengthen versus the JPY, EUR and GBP as the modest upgrade in economic assessment likely helped the US 5y swap rate break higher.

USD/JPY briefly moved above 83 as the "wait and see" Fed policy was juxtaposed with the extension of the BoJ's earlier decision to extend its special lending scheme.

The broader surge in risk-seeking sentiment pushed equities almost 2% higher and encouraging developments in the US financial sector contributed to the strong close in equities.

The late push in risk-seeking sentiment helped some of the higher beta currencies regain some ground versus the USD, with AUD/USD back to 1.0540 and USD/CAD to 0.9890 at the time of writing.