Singapore dollar remains above $1.28 against the greenback

RBS says risk-oriented currencies staged a comeback after the previous sell-off.

IG Markets Singapore said:

The Singapore dollar remains above the $1.28 level this morning as traders question the ability of policymakers to devise a long-term solution for the eurozone.

This has kept investors away from increasing their positions in risk assets with the local currency sitting comfortable at $1.2823.

It is likely to continue to trade in this range as we head into the Greek elections on Sunday.

There was a flight to safety last night which helped the US dollar and yen along with gold and bonds belonging to strong economies.

However, the US dollar’s appreciation was tempered by bullish talk from a Fed member of the need for a fresh round of quantitative easing.

RBS meanwhile noted (for 12 June 2012 trading):

Risk oriented currencies staged a comeback after yesterday's large sell-off. In particular, GBP/USD may complete a bullish daily reversal on a close above 1.5582.

The rise in the EUR, AUD, and NZD vs. the USD were particularly notable given the sharp increase in Spanish yields, as the 10-year note yield rose to a new Euro-area record high today.

In our Global Currency Weekly this week we preview the three central bank meetings this week. To sum up, we do not expect policy action from any of the banks (Norges Bank, RBNZ, and SNB).

The SNB may revise up growth forecasts while revising down inflation forecasts, delaying their expectation for emerging from deflation and giving the SNB plenty of scope to retain the 1.20 floor in EUR/CHF.

The RBNZ may sound less dovish after declines in the TW NZD and Norges Bank may sound dovish but due to loose fiscal policy, we eventually expect Norges Bank will have no choice but to accept a stronger NOK as a balance to loose fiscal policy.