Singapore dollar sits at $1.2179

The US dollar has been weakening.

IG Markets Singapore said:

A quiet night for risk assets saw the Singapore dollar edged slightly higher against its US equivalent.

The greenback has been weakening this week as traders factor in more monetary stimulus next week when Operation Twist expires.

The local currency sits at $1.2179 this morning having broken out of its $.122 ceiling.

Continued weakness in Singapore's manufacturing activity did little to sway the currency.

November manufacturing PMI data showed a fifth month of contraction last night as Asian economies struggle with the global slowdown.

DBS Group Research meanwhile noted:

When the US fiscal cliff issue emerged after the November 6th US presidential elections, many viewed it as a positive US dollar story. Today, almost a month later, the benchmark DXY (USD) index is now below the psychological 80 level with EUR/USD above 1.30.

First of all, the US fiscal cliff is viewed as political theatre and not as an imminent threat to the US economy. In fact, US lawmakers and some business leaders have painted a positive outlook for US economy if the cliff is averted in a timely fashion.

Unlike 2010, both the White House and the Republicans have been careful in communicating that, despite the differences in opinions over how to rein in the fiscal deficit, the door is open for a compromise solution by the end of the year.

Second, there is more confidence that China’s economy may be turning the corner. This helps to support the view that 2013 may be better than 2012 for the global economy.

Third, the Eurozone crisis has stabilized sufficiently not to worry the markets, though much work remains to be done to address the structural challenges. How do we know this? German Chancellor Angela Merkel is warning everyone against complacency on the Eurozone crisis.

Fourth, Japan called for snap elections not long after the US elections, and set the stage for a weaker yen, which in turn, fueled yen carry trades.

The US dollar tone is still weak, especially in Asia ex Japan. Hong Kong has yet to end its multiple interventions to support its HKD peg against the US dollar. The Australian dollar appreciated yesterday despite its central bank cutting rates to its lowest level.

In Singapore, USD/SGD finally broke below 1.22 despite disappointing growth numbers reported earlier. Last but not least, it is telling when the US dollar is also struggling to maintain its appreciation against Asia’s weak currencies, the Indian rupee and the Indonesian rupiah.