Singapore dollar holds firm at $1.245

Many will now be looking to MAS for clues to whether it may shift its policy ahead of its next meeting in October, says IG Markets Singapore.

IG Markets Singapore said:

The Singapore dollar has held firm at $1.245 against the greenback despite some weak print from the local economy.

On Friday, weaker-than-expected GDP data was released showing a contraction of 0.7% during Q2.

This was followed by slowing exports which were down 3.3%, on a quarter-on-quarter basis.

Such poor figures are inevitable for such an open economy that relies heavily on international trade.

The data failed to affect traders who decided not to sell off the Singapore dollar.

Many will now be looking to the Monetary Authority of Singapore (MAS) for clues to whether it may shift its policy ahead of its next meeting in October.

DBS Group research meanwhile noted:

Currency markets have yet to find a direction in August. June and July were spent recovering the losses incurred against the US dollar during the aggressive EU-led selloff in May.

While a resolution to the Eurozone crisis is not yet imminent, worries over the US dollar have crept in on several fronts. After US real GDP growth fell below an annualized 2% QoQ in 2Q12, speculation increased that the Fed would move towards a third round of quantitative easing measures, amidst worries that the US economy was headed towards a fiscal cliff.

While bearish sentiment for the euro was unchanged, doubts have emerged over the US dollar’s safe haven status. Unlike last year, there was no strong interest in the Chinese yuan either because the appreciation story has stalled with falling growth and lower inflation in China.

In fact, the central parity for USD/CNY was fixed at 6.3447, the highest since end-November. As for the euro, attention is turning towards the German Constitutional Court’s vote on the European Stability Mechanism and fiscal compact scheduled for September 12.

Hence, there was a flight to safety to the world’s remaining non-European triple-A rated currencies – the Australian dollar, the Canadian dollar and the Singapore dollar.