This week’s Focus updates our estimates of external debt in Emerging Asia, broken into foreign bank loans to the region and foreign currency-denominated debt securities issued by Asia’s banks, corporates, and sovereigns.

The medium-term balance of risks for USD/SGD has shifted to the upside ahead of today’s advance quarterly GDP prints of the US and FED monetary policy meeting and unemployment claims are scheduled for the next week. While the GDP in Singapore has been contracted 4.10 pct in the Q3’2016 over the previous quarter.

Observing market pricing Fed hikes in December, while the benchmark interest rate in Singapore was last recorded at 0.38 pct and other underlying factors, we foresee further upside risks up to 1.4080 and 1.4240 cannot be disregarded. 

Ass a result, we recommend considering 1*2*1 USD call/SGD put flies as expressions of steady SGD weakness are also well suited to riding a steady climb in USDSGD, the de-facto long dollar trade in Asian FX.

The spot rally received help from a high-side USDCNY fixing on Friday that propelled USDCNH to new YTD highs beyond 6.76 and carried the rest of the Asian bloc with it.

SGD weakness is typically a slow and steady phenomenon subject to MAS’ management of the NEER basket, more so in the current context in light of the 3% rally in USDSGD since mid-September already behind us.

For this reason, we steer clear of outright gamma ownership in SGD, and low premium USD call/SGD put flies are the preferred vehicles to play continued bearishness on the currency via options given their historical cheapness.