Singapore dollar feels pressure of 'renewed US dollar strength'

The greenback traded higher against all of the major currencies except for the Australian and New Zealand dollars.

IG Markets Singapore said:

The Singapore Dollar managed to trade either side of 1.27 against the USD in yesterday’s session – keeping below that figure in Asian trade, but as risk sentiment reversed our currency felt the pressure of renewed US dollar strength.

The reversal in fortunes once again followed the European woes, as the euphoria from the Greek election result waned and concerns over increasing bond yields, in particular the Spanish 10-year yield above 7%, once again took centre stage.

Along with the other perceived risk currencies our city-state’s currency came under pressure in later trade, but we managed to hold on to much of the gains unlike the euro which managed to fall over 1% from the high prints in early Asian trade.

We are still likely to remain in the hands of European-led sentiment for the remainder of this week, as the sovereign debt issues continue to mount and pressure global economic outlook.

BK Asset Management meanwhile noted (for 18 June 2012 trading):

The U.S. dollar traded higher against all of the major currencies with the exception of the Australian and New Zealand dollars.

By eliminating the near term risk of a Grexit, the Greek elections also removed the need for an immediate response from the G20. As a result, we expect no major reaction to the G20 communiqué, which will be released on Tuesday.

Two months ago, G20 leaders agreed to increase the IMF’s war chest by $430 billion. China has already committed to be a big lender along with other emerging market nations. It is hard to believe that we are living in a time when emerging nations are bailing out developed ones. Nonetheless that is the case and the more money, the better.

The EUR/USD will rally if the funds contributed exceed $430 billion. However with the U.S. keeping its pocketbook tightly closed this round, the contribution could fall short of target which would be killer for the EUR/USD.