Singapore dollar hits three-month high against the greenback

The local currency traded at $1.2454 on 1 August 2012 morning, its highest level since early May.

IG Markets Singapore said:

The Singapore dollar is finding friends among FX traders as it hits a three-month high against the greenback.

The local currency trades at $1.2454 this morning, its highest level since early May. Investor sentiment has improved across risk currencies, with the Aussie and Sing dollar the two biggest benefactors.

The ECB meet this week and traders hope more asset-buying will be announced which will ease concerns about growing tensions in Spanish and Italian bond markets.

While traders are prepared to take a punt on Asian currencies, they are choosing safer homes like Australia and Singapore.

The local currency may find resistance at $1.24 if no asset-buying is announced, which could precipitate a shift back above $1.25.

BK Asset Management meanwhile noted (for 31 July 2012 trading):

The Federal Reserve's 2 day monetary policy meeting is underway and a decision is expected at 2:15pm ET on Wednesday. Based on the small degree of dollar weakness today, investors are not looking for any overly hawkish or optimistic comments from the central bank.

Since the last monetary policy meeting, there have been improvements and deterioration in the U.S. economy. Retail sales for example dropped for the third consecutive month in June but GDP growth slowed less than expected and job growth has been anemic while inflationary pressures remain muted.

Most of the economic reports that matter including ISM and non-farm payrolls won't be released until the day of or after the Fed meeting. When Bernanke spoke earlier this month, he said they were trying to judge whether the loss of momentum in the economy is enduring and unfortunately there hasn't been enough reasons for them to lean one way or the other.