SGD: Scope to move higher - ANZ

Khoon Goh, Research Analyst at ANZ, notes that the USD/SGD has been moving higher and in the past week, the strength of the US dollar has driven it to an intraday high of 1.4197.

Key Quotes

“At present, we estimate the S$NEER at 0.4% below the midpoint of the policy band. As such, there is still scope for further S$NEER weakness before we reach the lower bound, which we estimate to be 2% below the midpoint which gives us an implied USD/SGD rate of 1.4400.”

“MAS noted at their October MPS that the policy band provides flexibility for the S$NEER to accommodate the near-term weakness in inflation and growth. With today’s NODX numbers showing a sharp 12%y/y contraction and the external environment still challenging, we expect the S$NEER to continue heading towards the lower bound.”

“The SGD real effective exchange rate (REER) is still well above its long-term average. Given the state of the business cycle, the REER is very elevated and has scope to correct lower.”