Singapore dollar trades at $1.2213

Trading in tight range persists as traders exercise caution.

IG Markets Singapore said:

The Singapore dollar continues to trade in a tight range as it hugs the $1.22 threshold.

Last night saw the Fed’s open market committee met to discuss the US economy and interest rate policy. As expected it maintained its stance on keeping rates low for the short to mid term.

The US dollar saw very little action as a result of this non-event and the Singapore dollar traded at $1.2213, within a tight channel as traders exercised caution.

There was a breath of fresh air with better-than-expected China flash PMI figures which bolstered sentiment towards Asian currencies.

However FX traders feel it is too early to significantly increase bets across the region until more concrete data is released.

BK Asset Management meanwhile noted (for 24 October 2012 trading):

It has been a long time since a Federal Reserve monetary policy meeting created as little volatility for the FX market as what we have seen today. USD/JPY moved approximately 10 pips when the FOMC statement was released while the EUR/USD enjoyed a slightly larger 25-pip move.

No one expected the Fed to change monetary policy but there was some hope that they would provide a boost to the market by acknowledging the improvements in the economy.

While the central bank did say that "household spending continued to advance," they also said fixed investment appears to have slowed, inflation has been subdued and the committee is concerned that without further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions.

These are hardly words of an optimistic central bank and in fact confirm that they are still very worried about the outlook of the U.S. economy and refuse to be swayed by one month of mediocre improvements in U.S. data.

However having just announced unlimited liquidity, a dramatic shift in tone would have also undermined their credibility and put the Fed at risk of being criticized for overreacting or worse, being partisan.