US dollar sits at $1.2211 against the Singapore dollar

The GDP figures did little to move the USD/SGD currency pair.

IG Markets Singapore said:

US economic growth hit 2% last quarter which gave a welcome respite from the poor corporate earnings among US blue chips this season.

But the better-than-expected GDP figures did little to move the USD/SGD currency pair which continues to trade in a tight range this month.

The greenback sits at $1.2211 against the local currency this morning with plenty of caution built into the currency markets courtesy of the US.

There is non-farm payrolls data, the biggest event on the US economic calendar, on Friday while next week Americans go to the polls to vote in the presidential elections.

Added to that is a nervousness over how the US economy will deal with the impending “fiscal cliff” which is preventing many traders from increasing their positions in USD.

DBS Group Research meanwhile noted:

There are too many events and data to juggle this week, both scheduled and unscheduled. On the unexpected front, Hurricane Sandy has overtaken next week’s US presidential election as the key event this week. The storm is expected to hit the US East Coast. New York is reportedly not going to close but banks are likely to operate on a skeletal crew. Nymex oil prices fell below $86/barrel.

Overall, currencies are likely to struggle to establish a trend against the US dollar, but cross rates may reflect a preference for Asian currencies over major currencies.

The two most closely watched central bank meetings will be the Bank of Japan (BOJ) and Reserve Bank of India (RBI) on October 30. In the latest week ending October 23, speculators have reportedly turned net short the Japanese yen for the first time since early June 2011. USD/JPY made a brief attempt to surpass the psychological 80 level last Thursday and Friday.

After touching a high of 80.36, the currency pair fell quickly back to a low of 79.48 last Friday. Yen bears are expecting the BOJ to increase its asset purchase program this week, and remain watchful of further deterioration in the spat between China and Japan over the Diaoyu islands.

In India, finance ministry has made known its desire for the central bank ease monetary policy to complement its reform efforts to re-energize the economy. The RBI is not expected to cut rates due to twin concerns over high inflation and wide fiscal deficits. It may, however, meet the finance ministry halfway with a token cut in the cash reserve ratio to 4.25% from 4.50%.

USD/INR has climbed towards 54 after it bottomed at 51.35 in early October, in line with the weak sentiment in global equities. The RBI is probably more concerned about rupee volatility from more risk aversion in global markets at this point.

As for the scheduled G20 Summit this weekend, it is likely to end up as a regular meeting. The US is too pre-occupied with both the hurricane and the presidential election. The US Treasury is, however, still likely to press China and other surplus-led emerging countries to let their currencies appreciate. Note that the US Treasury has delayed the Currency Report till after the meeting.

On a positive note, the Eurozone crisis is unlikely to dominate as urgently as it used to. The scope to return to a weak US dollar environment will also depend on how transitory the emerging economies view the current calm to be.