UOB Global Economics & Markets Research said USD/SGD finished at 1.2900, while its model put the Singapore Dollar Nominal Effective Exchange Rate (S$NEER) at 1.75% above the mid-point. It expects the S$NEER to remain within a 1.50%–2.00% band above the mid-point in the current session, which maps to a USD/SGD range of 1.2872 to 1.2937, with the US dollar broadly supported.
Across Asia on Thursday, moves were mixed: USD/IDR slipped to 17,710, down 0.16%, after Bank Indonesia (BI) raised rates by 25bps. USD/INR eased to 94.53, down 0.28%, while USD/KRW rose 1.50% to 1,539.30; the Malaysian ringgit weakened 1.3% to 4.1170 per dollar, and USD/SGD was up 0.15% at 1.2900. Risk sentiment improved modestly as markets assessed the Fed’s hawkish tilt alongside resilient US data, keeping front-end yields elevated and supporting the greenback.
Singapore Dollar Stability Amid Dollar Strength
Given the US dollar’s strength, we see the Singapore dollar holding its ground remarkably well. The S$NEER is trading high within its band, around 1.75% above the midpoint, which is containing USD/SGD in a very tight range. This suggests the Monetary Authority of Singapore remains committed to a strong currency policy to manage inflation.
Recent data reinforces this dynamic from both sides. Last week’s US core PCE price index showed inflation remaining sticky at 2.9%, while May’s non-farm payrolls report added a robust 210,000 jobs, keeping the Federal Reserve on a hawkish path. In Singapore, core inflation for May came in at a stubborn 2.8%, giving the MAS little reason to allow for any currency weakness ahead of its October policy meeting.
Range-Bound Trading And Risk Scenarios
This tug-of-war between a hawkish Fed and a hawkish MAS points toward continued range-bound trading for USD/SGD in the coming weeks, likely within the 1.2850 to 1.2950 corridor. For derivative traders, this environment is ideal for strategies that profit from low volatility. We believe selling USD/SGD options, such as short straddles or strangles, is an attractive position to take.
The primary risk to this view would be a major surprise in US economic data, which could cause a sharp repricing of Fed expectations. Historically, an unexpected spike in US unemployment has been a catalyst for a weaker dollar, which could push USD/SGD below its current support. Conversely, weaker currencies in the region, like the Malaysian Ringgit and Korean Won, demonstrate the underlying dollar demand that should limit the downside for the currency pair.
