USD/SGD likely to range trade between 1.345 and 1.362 over coming weeks, says Scotiabank

The USD/SGD currency pair is expected to range trade between 1.345 and 1.362 in the coming weeks, with the Singaporean dollar running an increasingly tight correlation with the CNH, while diverging somewhat from the EUR’s movements, according to the latest research report from Scotiabank.

MAS core inflation, which excludes the costs of accommodation and private road transport, eased to 1.4 percent y/y in March from 1.5 percent the previous month on lower inflation for retail items and utilities.

The city-state’s monetary authority has revised its forecast for core inflation to 1.0-2.0 percent in 2019 from 1.5-2.5 percent estimated previously, according to a statement dated April 23.

On April 12, the MAS decided to maintain its current S$NEER policy band that has a width of +/-2.0 percent and an annual slope of 1.0 percent according to our estimate. In the weeks ahead, the S$NEER is likely to stay in a range of 1.5-2.0 percent above the centreline of the policy band, the report added.

External factors will continue playing an important role in determining the SGD exchange rate. The US and China are set to hold the 10th and 11th round of trade talks respectively in Beijing next week and in Washington the week after, with the aim of reaching a trade deal in early May.

After that, China is expected to roll out new consumption spending incentives for cars and home appliances.

"We maintain our short USD/SGD position targeting 1.340 on expectations of the yuan’s potential gains, while keeping a close eye on US stock markets as a selloff could certainly trigger the safe-haven status of the dollar," Scotiabank added in its comments.