USD-SGD topside pegged at 1.2330

The SGD NEER has drifted further away from the extreme strong end of its fluctuation band.

OCBC Treasury Research noted:

Singapore’s Dec PMI readings (both headline and electronics) disappointed and coupled with the resurgence of the dollar overnight, has sent the USD-SGD materially higher in this morning’s dealings.

The SGD NEER meanwhile has drifted further away from the extreme strong end of its fluctuation band with the index estimated at around +1.18% above its perceived parity.

At current levels, the extreme strong end of the NEER band is estimated at around 1.2230, while the topside for the USD-SGD today is expected around 1.2330 pending further cues.

DBS Group Research meanwhile reported:

The US fiscal deal that raised taxes on the wealthiest Americans did not last beyond the first trading day of the new year. Yesterday, reality quickly set in that, from now till end-February, the Republicans are going to push hard for spending cuts in exchange for raising the federal debt ceiling.

It did not help that QE3 did not seem so infinite in yesterday’s FOMC minutes for the December 11-12 meeting. FOMC members were divided over whether they should keep buying assets till end-
December.

As a result, no one is looking forward to an upside surprise in tonight’s US nonfarm payrolls data, especially after ADP jobs data surprised with a 215K print for December vs the 140K consensus.

The unemployment rate, which had fallen to 7.7% by end-2012 vs 8.5% a year ago, will also be closely watched. The Fed had pledged to keep rates low until the unemployment rate falls below 6.5%.

The market will need to make up its mind on the state of the US economy. Is the US economy strong enough to withstand the fiscal consolidation and for the Fed to ease up on its accelerator? Or is it still fragile and vulnerable to “tighter” fiscal and monetary policies tipping it back into recession?

Market probably over-reacted yesterday, as the Fed will need to stand by US government bonds, especially before the debt ceiling limit is raised. So, don’t be surprised if Bernanke and other core
Fed officials come out to reassure markets that all is still well.