Singapore continues trading in tight band

The MAS meanwhile may slow the appreciation of the local currency to help the country’s exporters.

IG Markets Singapore said:

The Singapore dollar continues to trade in a tight band against the greenback sitting at $1.227 this morning.

Inflation figures were released yesterday showing an easing to 3.9% in August, compared to 4% in July.

Although a slight reduction, it may give the Monetary Authority of Singapore more wiggle room in its policy easing.

The MAS may slow the appreciation of the local currency to help the country’s exporters, at a time when international trade is suffering due to the eurozone crisis.

Asian currencies may also benefit from the hot flow of money coming via central bank liquidity measures.

DBS Group Research meanwhile noted:

The market is still struggling with global growth worries. Recent comments and views by many countries are not helping.

The G20 is beginning to see the need for more cooperation amongst countries to act against the global economic slowdown from a potentially deeper Eurozone recession, a US fiscal cliff and the slowing growth in emerging economies.

San Francisco Fed President John Williams assured that QE3 is likely to continue into late 2014, and act as an “automatic stabilizer” to growth pressures from Eurozone and the uncertainty surrounding US fiscal consolidation plans.

The International Monetary Fund (IMF) appears to be softening its tone for austerity in Eurozone. For example, the IMF is arguing that bailouts should focus on measures, and not targets, and also recommended slowing fiscal consolidation in Spain and Portugal.

The above words and actions affirm the market’s recognition that as far as America and Eurozone are concerned, recent monetary policy easing by central banks are no panaceas to growth fears.

With monetary policy already “unlimited”, markets need policymakers to assuage fiscal drag worries. Until then, the greenback is likely to stay underpinned for now.