Singapore dollar slips above $1.27

The local currency lost ground to the US dollar as investors anticipate weak data from China, says IG Markets Singapore.

IG Markets Singapore said:

The Singapore dollar has lost ground to the greenback slipping above $1.27 as investors anticipate weak data from China.

The mood is one of pessimism this morning with poor GDP growth on the cards for the Chinese economy which would affect Asian currencies.

Singapore has already posted its Q2 GDP numbers this morning which disappointed slightly with contraction of 1.1% on a quarter-on-quarter basis.

Although on a yearly basis, economic growth grew 1.9% which is healthy given the tough trading climate.
This has seen the local currency slump to $1.2716 this morning against the US dollar.

RBS, on the other hand, reported (for 12 July 2012 trading):

The G10 currencies stayed in relatively narrow ranges versus the USD on another quiet day for equities and broader risk-seeking. Overall risk-seeking sentiment was likely kept in check by the upcoming release of 2Q Chinese GDP growth, which is expected lower than 1Q (Bloomberg consensus 7.7% y/y versus 8.1% in 1Q).

There was some modest appreciation by the higher-beta currencies as equities recovered from a lower start of the session but the CAD was the only one to recoup all of its overnight weakness versus the USD as the pair dipped below 1.0190 at the time of writing.

AUD/USD and NZD/USD remained well below levels last seen in the Asian and European sessions. Both the recovery in equities and the accompanying rebound in crude oil and natural gas prices likely proved supportive for the CAD.

Elsewhere, the decline in USD/JPY following the BoJ policy decision stopped during and the pair ended up trading around 79.30 for the majority of the NY session. Chinese GDP and retail sales and industrial production data for June will likely be the major drivers for risk sentiment as the rest of the calendar is filled with lower-tier data releases.

DBS meanwhile noted:

Asia’s three most export-oriented economies – South Korea, Taiwan and Singapore – are no longer ignoring downside risks from the world’s three major economies – America, Eurozone and China.

In Korea, the surprise rate cut yesterday signaled that growth has now overtaken inflation as the main concern of policymakers. Indeed, exports to the European Union and China are already lower than a year ago levels, on a 3-month moving average basis. Export growth to the US has also stopped improving.

Together, these three economies accounted for almost 44% of Korea’s exports in the first five months of this year. Not surprisingly, USD/KRW closed higher at 1154 yesterday, up from its 1140 open. We maintain our view for the currency pair to continue rising to 1260 by end-September.

China also surprised when it delivered its second rate cut in as many months last Thursday. In turn, this has increased expectation that the economy may be slowing more than initially thought.

Hence, the broad view that real GDP growth will fall below the psychological 8% level in 2Q12, both in YoY and YTD terms, for the first time since 2Q09. Growth has been trending steadily lower since peaking at 11.9% YoY in 1Q10 to 8.1% in 1Q12. CPI inflation eased to 2.2% YoY in June from its 6.5% highest point last July.

Against this background, focus has fallen on when Taiwan will join Korea and China in easing rates. Not long after Korea’s rate cut yesterday, Dow Jones quoted an unnamed Taiwan official that the central bank may hold an unscheduled monetary policy meeting if needed. In YoY terms, both export orders and industrial production have been in negative territory in five out of the last six months ending May.

USD/TWD rose to close at 30 yesterday, affirming our long-held view that the currency pair should be above this psychological level in a weak external environment, especially now that Taiwan’s real GDP growth have fallen below its US counterpart.