Singapore dollar trades at $1.25

The US dollar had initially weakened but then gained against the local currency.

IG Markets Singapore said:

It was a choppy session for currencies following the central bankers’ meeting at Jackson hole on Friday which saw the dollar fall then rise.

Currency traders were left scratching their heads as to when the Fed might inject billions of dollars into the US economy to buy bonds.

While markets were initially disappointed by Fed chairman Bernanke’s speech they rallied on hopes QE3 could be announced as early as next week.

It was a similar case for the USD and the Singapore dollar. The greenback initially weakened but then gained against the local currency leaving it at $1.25 this morning.

Asian currencies could be in for a rollercoaster ride this week as traders digest the Jackson Hole speeches, look ahead to the ECB policy speech on Thursday and Friday’s non-farm payrolls data.

Hold onto your FX hats this week.

DBS Group Research meanwhile noted:

The European Central Bank (ECB) meeting on September 6 will be closely watched. More so after ECB President Mario Draghi decided not to attend the Fed’s symposium at Jackson Hole held late last week, citing a busy work schedule.

Given all the talk centered on capping government bond yields of struggling Eurozone nations, it is hoped that Draghi will offer some glimpses of the ECB’s bond purchase game plan.

Then again, the market is not too hopeful. Fed Chairman Ben Bernanke disappointed at Jackson Hole by only reiterating the Fed’s willingness to act, and not laying out a clear path towards action.

In some ways, the ECB is seen facing the same hurdles as the Fed, namely, division within the central bank and resistance from lawmakers regarding more monetary stimulus.

Coincidentally, reports surfaced last week that Bundesbank President Jens Weidmann considered resignation in opposition towards any new bond-buying scheme.