We reckon that SGD trading calculation does not remain in sync with pounds, and GBP with Euro more gains seen on GBP side. The key elements of high impact economic indications are shown below that are to be accounted while trading Singapore dollar.
Reduced unemployment in Q1: Unemployment Rate in Singapore decreased to 1.80 % in the Q1 of 2015 from 1.9 percent in the Q4 of 's seasonally adjusted jobless rate decreased marginally to 1.8% in the first quarter of 2015 from 1.9 percent in the previous period according to preliminary estimates.
Singapore's Increased Trade Surplus: Singaporean trade surplus significantly widened to SGD 8.63 billion in March of 2015 from SGD 2.27 billion a year earlier, as imports fell at a slower pace while exports unexpectedly increased. Non-oil exports rebounded as both electronic and non-electronic shipments expanded. Balance of Trade in Singapore is reported by the Statistics Singapore.
Emerging South Asia: Although in this month we focus our attention on the Bank of Thailand's surprising move to cut rates again in April, elsewhere, we take an early look at growth momentum in Q2, through the lens of the April manufacturing PMIs. And in addition our skepticism on Japan that there would be a new policy announcement, given the logistical constraints surrounding the current program, our focus was on the semi-annual update to the Bank's forecasts. On this front, the medium term inflation projections are still zooming in on the 2% objective, consistent with the unchanged policy stance.
Well..! We suppose that all above economic figures maintains the similar flow then Singapore dollar would certainly be an underpriced asset over Euro. And with some further downside risk for predicted against pounds this can be cross-hedged with EURGBP also.
Derivatives Insights:
Option Strategy: Cross Hedging (Call + PRS)
As we could foresee the downside pressure on SGD with GBP, we straightway like to buy more necked call options of GBPSGD pair as we think the valuations states this pair is overpriced and these necked options would like to be hedged with other pair (i.e. EURGBP) which is a clear downtrend.
Hence, strategy is quite simple, buy ATM Call options of GBPSGD and simultaneously buy put ratio spreads of EURGBP pair as well.
In order to construct PRS (Put Ratio Spread), combine Bear Put Spread and naked put option of EURGBP. Buy a Put and sell more Puts at a lower strike price in ratio of 1:2 or 1:3.
A Short time to expiration is preferred to take advantage of time decay in short positions and not to give stock time to move lower. Margin is required to take short Put positions.
