USD/SGD holds around 1.34-1.37 range, likely to hold this level for now: Commerzbank

The USD/SGD currency pair has been rather stable since the start of the year, holding around the 1.34-1.37 range and this range is likely to hold for now, according to the latest research report from Commerzbank.

The latest macroeconomic outlook from the Monetary Authority of Singapore (MAS) painted a more cautious growth picture. They expect growth this year to be slightly below the mid-point of the official 1.5-3.5 percent growth guidance or just below 2.5 percent.

This is on the back of the slower global growth backdrop, sluggish trade, and the downturn in the global electronics sector. MAS expects the positive output gap to narrow and along with the policy tightening in 2018, inflationary pressures should remain in check.

This is why MAS kept policy unchanged in April after tightening twice in 2018. Given modest growth and inflation under control, we expect MAS to stay on hold in the October policy meeting as well. MAS has in fact lowered the core inflation forecast for 2019 to 1-2 percent from 1.5-2.5 percent previously.

"In terms of the SGD NEER valuation, we estimate it is still at the strong end of policy band even though USD-SGD popped up a bit last week to the 1.3620 level. What this implies is that a lower USD-SGD is more likely to be driven by a weaker USD or strength in other Asian currencies e.g. CNY or MYR rather than independent SGD appreciation," the report further commented.