The greenback slips to $1.245 against the Singapore dollar

The local currency has gained ground on the US dollar as traders stand firm on hopes of QE3, says IG Markets Singapore.

IG Markets Singapore said:

The Singapore dollar has gained ground on the greenback as traders stand firm on hopes of QE3.

The dust has now settled on last week's Jackson Hole central bankers' meeting and the feeling is that the Fed is on course to inject billions of dollars into the US economy sooner rather than later.

This has led to some dollar weakness. As a result USD has slipped to $1.245 against the local currency.

But there are still plenty of game-changing events this week with US manufacturing data tonight, the ECB policy meeting on Thursday and US jobs data on Friday.

September promises to be a volatile month for all risk assets, and Asian currencies are likely to feel a certain amount of turbulence.

DBS Group Research meanwhile noted:

The Reserve Bank of Australia is likely to leave its cash target rate unchanged at 3.50% for the third consecutive meeting.

The minutes for the RBA meeting last month repeated that policy was appropriate given the RBA’s outlook for trend growth and contained inflation. The minutes added that the full effects of the total 150 bps of cuts administered between November and June has yet to become apparent.

For now, the 3.50% policy rate is viewed as consistent with the RBA’s framework to foster sustainable growth and inflation at 2-3% over time.

Hence, the central bank is unlikely to be too concerned if tomorrow’s GDP report results in headline growth moderating to 3.5-4.0% YoY in 2Q12 after a strong 4.3% expansion in the first quarter.

Therefore, AUD bears are better off looking outside of monetary policy to sell the currency. The retreat of the AUD/USD from its 1.0612 peak since early August to 1.0243 yesterday was probably better explained by speculators covering their record net long positions.

Needless to say, the next support for AUD/USD is parity once the 100-day moving average at 1.02 fails to hold.