USD/SGD likely to range trade between 1.345 and 1.362 in the weeks ahead, says Scotiabank

The USD/SGD currency pair is expected to range trade between 1.345 and 1.362 in the weeks ahead, on expectations that the US and China reach a trade deal in April or May finally, according to the latest research report from Scotiabank.

MAS Core Inflation, which excludes the costs of accommodation and private road transport, eased to 1.5 percent y/y in February from 1.7 percent the previous month on lower inflation for services, retail items and utilities.

However, Singapore’s core inflation is still expected to "be in the range of 1.5–2.5 percent" in 2019 on account of supportive labour market conditions, according to a statement issued by the city-state’s monetary authority on Monday.

"We expect the MAS to maintain its current S$NEER policy band when it publishes its semiannual monetary policy statement not later than April 12. According to our estimate, the band has a width of +/-2.0 percent and an annual slope of 1.0 percent. The S$NEER is likely to stay in a range of 1.3-1.6 percent above the centreline of the MAS S$NEER policy band ahead of the April MAS policy meeting," Scotiabank commented in its report.

With the MAS likely to stay on hold in April, external factors will continue playing an important role in determining the SGD exchange rate. The SGD has been running a close correlation with the EUR and the CNH, as high as 76 percent and 74 percent respectively over the past 12-month period.

It is attributable to the MAS-managed S$NEER basket in which both the EUR and the CNH carry a large weighting. The SGD depreciation in the past sessions was due to weak Eurozone data and hovering concern over US-China trade talks, the report added.