Singapore dollar losing ground

The local currency trades at $1.2299, edging closer to the $1.23 threshold.

IG Markets Singapore said:

Although the Singapore dollar is stuck in a narrow trading band against the greenback it is slowly losing ground.

This morning the local currency trades at $1.2299, edging closer to the $1.23 threshold.

The Singapore dollar rose to the lower end of the $1.22 handle directly after dollar-weakening QE3 was announced earlier this month.

While the pair have moved very little since, there is a general appreciation of the greenback against the Sin dollar as traders question the impact QE3 will actually have.

Last night markets witnessed a heavy sell-off in risk assets. Today we have Singapore factory output data which will reveal more about the state of the local economy and what policy stance the Mas may take in its appreciation of the Singapore dollar.

BK Asset Management meanwhile noted (for 25 September 2012 trading):

For the euro this week, it is all about Spain. As the images of protesters clashing with police in Spain's capital flashed across the television screens on trading floors, the euro fell quickly against the U.S. dollar.

Throughout the European trading session, the EUR/USD quietly edged higher but when the media showed how much tension has been created by the plans for further austerity, investors realized that the economic crisis could also create a broader social and political crisis for Spain.

Tens of thousands of protestors clashed with police in Madrid today, tearing down barriers blocking access to Parliament and prompting the firing of rubber bullets. There's no easy way out of this mess and this social unrest will only make the tough decisions even tougher.

On the one hand, the financial community won't let up on Spain until they succumb to a sovereign bailout and on the other the Spanish government is struggling to contain this unrest that has included calls for the government to resign.

While there have been a number of clashes between protestors and police that have involved firing of rubber bullets and beatings with batons, this latest violence is occurring days before Spain is expected to announce a new round of unpopular reform measures on Thursday in the draft of the 2013 budget.

Considering that this will be the Prime Minister's fourth round of belt tightening in 9 months, we can't blame the people of Spain for being very angry. If Spain were to ask for a sovereign bailout, it would come at a cost of even more austerity.