Singapore dollar trades in narrow ranges

The local currency held firm against most major currencies.

IG Markets Singapore noted:

The SGD held firm against most major currencies, and traded in narrow ranges.

This was despite inflation data which showed CPI for all items accelerated from 3.6% in November to 4.3% in December, placing inflation for 2012 at 4.6%.

The main pressure came from accommodation costs, which averaged 8.9% across the year. These had increased in December back up to 8.5%, from 6.6% the previous month.

These headline figures also include private road transport, which includes the ever-increasing COE prices.

Core inflation, which strips these accommodation and transport factors out, edged lower. Labour markets remain tight and supply conditions for imports such as food could also see some upward price pressure. Both could filter through to consumer prices.

Core inflation for 2013 is still expected to remain within 2 -3%.

Against the greenback, the SGD trades at around 1.227 after gaining close to 6% last year as the MAS maintained a modest and gradual appreciation of its currency.

Elsewhere in the forex front, EUR/USD remains choppy as risk assets have been in a holding pattern over the past few days with investors searching for fresh leads to focus on.

The yen was very much in focus as the market had its first chance to react to the BoJ’s policy finally being announced. JPY gained back some lost ground against its peers, with the measures going as far as many traders had hoped.

The EUR/USD trades in the channel of 1.328-1.336 as the market seeks inspiration from the European PMI readings due out today.

OCBC Treasury Research meanwhile reported:

This morning, the SGD NEER is trading around +0.67% above its perceived parity (1.2365) with the extreme strong end of the NEER fluctuation band expected at around 1.2185 given current market prices.

Expect the 1.2330 area to continue to cap for now.