The Singapore Dollar (SGD) extended its run of declines against the Pound Sterling (GBP) and US Dollar (USD) as market attention focuses on Wednesday’s Federal Reserve policy meeting.
Any sign that Federal Reserve policy makers are edging closer to hiking interest rates is forecast to weaken the currency further. On the domestic front, the Singapore currency is likely to be influenced by the release of February’s export data on Tuesday. Economists are widely expecting the data to show that exports grew by 1.5% on a year on year basis, a slower pace than the 4.3% rise recorded in the first month of the year.
‘Looking at recent Fed speaks and economic data (apart from some distortion due to bad winter weather last month), they seem to support a mid-year liftoff in rates and that means there is a strong likelihood of Fed potentially removing the word ‘patient’ in the upcoming meeting,’ said a currency trader.
The Singapore Dollar weakened against the ‘Greenback’ despite the release of data, which showed that US manufacturing output fell for a third straight month in February as car production tumbled. The softer than forecast data suggests that the US economy experienced slower economic growth in the first quarter than forecast.
Factory production in the world’s largest economy fell by 0.2% last month after a 0.3% revised decline in January. Car production meanwhile tumbled by 3%. Economists had forecast that manufacturing output would rise by 0.1% in February. Mining output was shown to have declined by 0.2% and utilities rose by 7.3% due to increased demand because of harsh winter weather.
With little else due in terms of Singapore domestic data releases, the currency will be influenced by events in the USA and Eurozone.
Concerns over a possible Greek exit from the single currency bloc could assist the Singapore currency. If Greece leaves then the US Dollar and Pound Sterling will likely surge as investors scramble to seek shelter in safe haven assets. As those two currencies become more expensive, investors will then look to other safe haven economies with strong balance sheets.
Another source of potential gains for the currency could be China. If the world’s second largest economy begins a quantitative easing programme then a wave of cash from China could flow into Singapore as investors seek higher yields.
The US Dollar to Singapore Dollar Exchange Rate was trading in the region of 1.3884