Singapore dollar’s appreciation forecast to slow

The local currency’s appreciation against the US dollar may slow to help support exports, says IG Markets Singapore.

IG Markets Singapore said:

The Singapore dollar’s appreciation against the greenback may slow to help support exports, after another weak read for manufacturing data.

The Monetary Authority of Singapore could shift its stance from one of curbing inflation to boosting growth to counter the slump in global demand.

The local currency was virtually unchanged against the USD last night after a choppy night on Wall Street. It sits at $1.247 this morning.

Weak US factory output wobbled markets but they were underpinned by hopes of Fed easing as early as next week.

Singapore also published its own weak manufacturing data yesterday which has raised the question of whether the MAs will slow its appreciation to make exports cheaper.

DBS Group Research meanwhile noted:

Euro bulls are getting nervous ahead of tomorrow’s European Central Bank (ECB) meeting. Since July 25, when EUR/USD threatened to break below the psychological 1.20 level, the ECB has sought to stand behind the euro.

ECB President Mario Draghi argued that in order for the ECB to achieve its price stability mandate, the central bank will need to ensure financial stability by buying bonds, especially those of struggling EU nations.

Put simply, a single currency cannot have divergent borrowing costs across Eurozone countries. Draghi will also reinforce that point that a single currency also requires a common commitment towards fiscal discipline.

In other words, EU governments seeking the ECB’s help to lower their borrowing costs will need to demonstrate political will on austerity.

Hence, the ECB meeting tomorrow will be important in determining if Eurozone has taken an important towards resolving its crisis.