Singapore dollar gains from weakness of the greenback

This as risk assets in general took a step forward overnight.

IG Markets Singapore said:

The Singapore dollar benefited from USD weakness, as risk assets in general took a step forward overnight.

With the ECB affirming their pledge to backstop eurozone governments when they ask, it seems traders are still happy to buy in to this promise.

Having flirted with trading above 1.23 we have moved back to a 1.22 handle, and we currently sit flat for the week around 1.2270.

As ever with the SGD, speculation of where the lower end of the permitted trading band sits will come in to focus if we push back to the 1.20 level, which could happen if general USD weakness grips the market.

To that end tonight’s non-farm payrolls will be closely watched, with an additional 110k jobs last month expected. A low print would open the door for the Feds open-ended QE to be enacted, therefore providing further USD weakness, to the benefit of risk assets once again.

BK Asset Management meanwhile noted (for 4 October 2012 trading):

The U.S. dollar traded higher against all of the major currencies thanks to the improvement in risk appetite.

While it can be said that the prospect of better than expected labor market numbers drove investors out of safe haven currencies, this is not completely true because otherwise the dollar would have also moved higher against the Japanese Yen.

Friday's non-farm payrolls report will determine whether the rally in risk continues or fades and judging from the leading indicators for NFPs, it will be a tough call.

According to a survey conducted by Bloomberg, the current consensus forecast is for payrolls to rise by 115k. This forecast represents an increase in job growth from August, when payrolls rose by only 96k.