The Singapore Dollar was trending in the region of a 4 ½ year low against the US Dollar on Monday as the Asian asset extended recent losses.
A global slowdown, accommodative local monetary policy and slowing domestic expansion have weighed on the Singapore Dollar in recent months and demand for the currency was further undermined by the publication of Singapore’s latest inflation data.
The report showed that the downtrend in consumer prices continued at the beginning of 2015, with the index drifting to its lowest level for five years.
Inflation in Singapore printed at -0.2% on the month in January, the same figure recorded in December.
On a year-on-year basis, the nation’s consumer price index came in at -0.4%, down from an annual figure of -0.2% the previous month.
Trading Economics said that January’s decline in inflation ‘is mainly due to declines in the cost of transport, housing, clothing and footwear. Year-on-year, prices fell for: transport (-3.1% in January from -4.1% in December, as the cost of private road transportation decreased 5.0%) and housing (-2.4% from -1.4% as the cost of fuel and utilities fell by 5.6% and the cost of accommodation declined by 1.9%).
The data saw the USD/SGD pairing advance from Friday’s closing level of 1.3602 to 1.3639 – the 2010 high brushed earlier in February.
The US Dollar came under a little strain last week as the Federal Open Market Committee policy meeting minutes indicated that the Federal Reserve isn’t as gung-ho on the subject of interest rate increases as it has been in recent months. Despite this, the ‘Greenback’ is still in line to post a six monthly advance against the Singapore Dollar.
The US Dollar to Singapore Dollar exchange rate largely held gains during the North American session even as the US published mixed economic reports.
While the US Chicago Fed Nat Activity Index showed improvement, climbing from -0.07 to 0.13, existing home sales in the nation were shown to have fallen by -4.9% on the month in January.
A decline of -1.8% had been expected.
Later this week, additional Singapore Dollar movement could be caused by the publication of domestic Industrial Production data.
The industrial output report, scheduled for release at 05:00 GMT on Thursday, is expected to show a -2.9% month-on-month decline in production in January. This would wipe out the previous month’s gain of 1.8%.
However, the annual figure has been projected to improve from -1.9% to 3.1%.
Singapore is also scheduled to release its Bank Lending number on Friday.
The week’s major US reports – such as the nation’s Consumer Price Index and Durable Goods Orders figure – are liable to trigger additional USD/SGD fluctuations.
If the pace of US inflation slows to such an extent that it pushes back Federal Reserve interest rate hike expectations, the Singapore Dollar could recover ground before the weekend.