SGD NEER firmer amidst return of market appetite for risk

Singapore now seems to be receiving the status as a potential safe haven in Asia, says IG Markets Singapore.

IG Markets Singapore said:

After trading most of the week comfortably with a 1.25 handle the latest push forward in risk appetite has seen our Island State’s currency move forward again against the greenback adopting the 1.24 handle in Friday’s trade.

The market’s appetite for risk certainly returned last week, with confidence fostered due to a belief in eurozone central bankers’ rhetoric. This was supported on Friday when the premiers from France and Germany issued a joint statement of solidarity and support for the single currency.

The resilience of the local stock market over the past months, where the search for yield has seen the global investors flocking to Singapore’s shores on a buying spree, has no doubt increased the appeal of investing in Singapore and the local currency. We now seem to be receiving the status as a potential safe haven in Asia as there still is much uncertainty despite the risk-on rally last week.

The week ahead will be focused on Central Bank meetings with ECB, BOE and the Fed taking centre stage. After last week’s talk the ECB especially has to deliver big as much expectation is now priced in to risk assets globally.

OCBC Treasury Research meanwhile noted:

The SGD NEER is yet firmer this morning at around +0.67% above its perceived parity (1.2570) with the extreme strong end of the NEER fluctuation band estimated at 1.2325. We stay heavy on the pair within a 1.2430-1.2530 and the pair may orbit the 1.2480 are pending further news flow.

Elsewhere, a SGD NEER basket trade proposition may also be beginning to look interesting with the forward NEER basket in discount (on the back of recent global interest rate moves) while we retain the view that the MAS may only flatten the gradient at its next meeting in Oct 12.