- The US dollar has fallen over 6/10 of a percent against the Singapore dollar, which is a significant move considering that the pair does not tend to be overly volatile.
- This is primarily a reaction to the Consumer Price Index numbers in the United States coming out cooler than anticipated.
- This has people already hoping that the Federal Reserve might cut interest rates sooner rather than later, but it’s also worth noting that the FOMC meeting is late in the day and could change the overall attitude.
Are We Are Range Bound?
I think at this point in time we have to answer the question as to whether or not we are simply going to be range bound. This is not a huge surprise, because the USD/SGD pair tends to be very sideways in general, because it’s not necessarily the most volatile pairs, and it’s worth noting that the Singapore dollar is essentially the same thing as trading the Swiss franc, as a lot of the fundamentals are very similar. Singapore is considered to be the “Switzerland of Asia”, when it comes to currency trading.
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At this point, if we were to break down below the 1.34 level, that could be very negative for the US dollar, perhaps sending this pair down to the 1.33 level. On the other hand, if we turn around and rally from here, the 1.3540 level could be the ceiling, as we would go back and forth. Keep in mind this is a pair that tends to move at the speed of cattle, so you need to be very patient with whatever long or short position you do end up putting on.
Keep in mind that the interest rate in Singapore is just 3.51%, as far as the overnight rate average is concerned, so therefore the interest rate differential certainly favors the US dollar. In other words, the FOMC is a being hawkish, we may turn right back around in this pair as it doesn’t pay you to go short as far as the swap will be concerned.
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