OCBC’s Sim Moh Siong and Christopher Wong expect the Monetary Authority of Singapore to keep the Singapore Dollar Nominal Effective Exchange Rate (S$NEER) policy settings unchanged at Monday’s monetary policy statement, even after core CPI edged up to 1.6% year-on-year in June. The move is framed as a pause following April’s decision, with the latest data described as a modest rebound that does not, on its own, point to a broad or persistent inflation impulse.
Attention is expected to fall on the accompanying statement and its treatment of inflation risks. The note points to lagged pass-through from imported costs and energy as factors MAS may still be assessing, and it flags that references to imported inflation or renewed domestic price pressures could support a firmer S$NEER. On this view, unchanged policy would likely keep any immediate SGD reaction contained, unless the tone leans more cautious on inflation.
Market Volatility And Trading Strategies
We expect the Monetary Authority of Singapore to keep its currency policy unchanged this Monday, meaning derivative traders should prepare for low immediate volatility. Since the Singapore Dollar’s nominal effective exchange rate is projected to hold steady, short-term option sellers can capitalize on the post-announcement volatility crush. We recommend focusing on range-bound strategies like iron condors on USD/SGD, which has recently hovered within a tight 1.31 to 1.34 bracket.
Inflation Trends, Policy Outlook And SGD Bias
Although Singapore’s June core inflation edged up to 1.6%, this is a significant drop from the 3.1% average seen in 2024. This cooling trend supports our view of a policy pause, but persistent imported costs mean the central bank will keep a hawkish undertone. We suggest maintaining a slight bullish bias on the Singapore Dollar against weaker basket currencies, as the S$NEER path will likely remain on its current appreciating slope.
For traders in the FX options market, implied volatility on USD/SGD contracts has historically slumped after MAS meetings where policy is maintained. Going long on SGD call options on dips could yield steady returns if concerns over energy prices keep the local currency firm. We advise monitoring the MAS policy statement closely, as any unexpected hawkish tilt regarding domestic price pressures will quickly drive the SGD toward the upper bound of its trading band.
