The prospective Monetary Authority of Singapore (MAS) policy decision comes against a rather unusual backdrop. The SGD is trading persistently below the estimate of the lower (-2%) limit for the currency against the NEER basket. A reweighting of the NEER basket by the MAS may be partly responsible for this (giving a higher weighting to the euro) but the MAS may also now adopt a more tactical approach to FX intervention, rather than defending a specific SGD level.Standard Chartered notes….
- In any case, this week’s USD-SGD retreat is likely to be short-lived, and amid the monetary policy divergence we forecast USD-SGD at 1.44 for mid-year.
- Corporates should use USD-SGD pull-backs to boost hedge ratios on forward USD payables.
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