Written by Roshni Nair
(Reuters) –
Investors have become bullish on the Singapore dollar for the first time since mid-December as growth and inflation dynamics in the city-state continue to support the local currency, while bearish bets on most Asian currencies have eased, a Reuters poll showed on Thursday.
Long positions on the Singapore dollar hit their highest since early April 2023, while bearish bets on the Malaysian ringgit fell to levels seen in April last year, according to a bi-monthly poll of 10 analysts.
The Monetary Authority of Singapore does not appear to be in a rush to ease policy settings after core inflation read above 3% in May with strong second-quarter growth of 2.9%, according to analysts.
The Monetary Authority of Singapore will conclude its policy meeting on Friday, with analysts expecting the central bank to maintain its hawkish stance and stick to its current policy settings even as inflation in June hit a two-year low.
“Strong data (growth and inflation) and continued appreciation of the SGD’s nominal effective exchange rate make us continue to favor the SGD on a relative value basis and against lower-yielding currencies in the region,” Bank of America analysts said in a note.
They added that any rise in oil prices due to geopolitical events would put upward pressure on the Singapore dollar’s safe-haven status.
Singapore is among the few countries in the world with an AAA sovereign credit rating, reflecting exceptionally strong fiscal and external balance sheets, factors that reinforce its position as a safe haven for investors.
Meanwhile, markets have priced in a 100% chance of a rate cut by the U.S. Federal Reserve as early as September, as investors await a slew of macroeconomic data, including second-quarter growth figures, to further validate their bets. (FEDWATCH)
Lower interest rates in the US would reduce the dollar’s appeal, as it could lead to lower foreign investment while stimulating risk sentiment in emerging Asian currencies.
This has also significantly reduced short bets on the Philippine peso and Thai baht.
Bearish sentiment towards the Chinese yuan and Taiwan dollar reached its highest levels since June 27.
Taiwanese markets extended losses on Wednesday after Washington said last week it could impose tougher restrictions on exports of advanced semiconductor technology to China.
Taiwan markets were closed for the second day in a row due to bad weather.
The Asian Currency Position Survey focuses on what analysts and fund managers believe are current market positions in nine emerging market Asian currencies: the Chinese yuan, South Korean won, Singapore dollar, Indonesian rupiah, Taiwan dollar, Indian rupee, Philippine peso, Malaysian ringgit and Thai baht.
The survey uses estimates of net long or short positions on a scale of -3 to plus 3. A score of plus 3 indicates that the market is significantly long the US dollar.
Figures include positions held through non-deliverable forward contracts (NDFs).
Below are the survey results (positions in US dollars against each currency):
Date USD/SG USD/ID USD/IN USD/TH
drprp
July 25, 2024 1.07 0.79 -0.33 0.35 0.86 0.12 0.39 0.43 0.02
July 11, 2024 1.05 0.87 0.06 0.73 0.68 0.22 1.03 0.86 0.51
June 27, 2024 1.34 1.28 0.80 1.49 0.88 0.46 1.00 1.37 0.91
June 13, 2024 0.95 0.87 0.62 1.22 0.64 0.37 1.00 1.23 0.92
May 30, 2024 1.05 0.72 0.33 0.94 0.53 0.00 0.81 1.19 1.00
May 16, 2024 1.05 0.96 0.35 0.96 1.02 0.39 1.23 1.29 1.00
May 2, 2024 1.25 1.61 0.89 1.39 1.40 0.49 1.46 1.44 1.39
18-Apr-24 1.25 1.59 0.80 1.32 1.24 0.43 1.42 1.19 1.28
4-Apr-24 1.18 1.09 0.42 1.13 1.17 0.00 1.15 0.62 1.35
21-Mar-24 0.92 0.82 0.33 0.60 0.92 -0.54 1.12 0.47 1.13
