Singapore dollar tumbled to 7-months lows to 1.3959 levels on disappointing growth flashes and the dovish tone of MAS. Q3 GDP grew by slower than anticipated at 0.6%.

Following the MAS announcement, the Singapore dollar slipped somewhat against the US dollar but soon weakened to 1.3920 per US dollar, hitting its lowest levels since early March.

While the central bank has opted to stand pat for now, a dovish tone in the policy statement, which implies the likelihood of further easing amid weak inflation and growth outlook, set the stage for weakening in the local currency, analysts told Channel News Asia.

Similar constructs 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 vehicle to play continued bearishness on the currency via options given their historical cheapness.

Off spot ref. 1.3865, 2M 1.40 – 1.42 with 1.44 RKI – 1.44 1*2*1 USD call/SGD put flies are indicatively offered @ 28bp USD (5 times max gearing if RKI triggers, 9.9 times if it does not).

Alternatively, long EURSGD vs. short USDSGD gamma the spreads form a classic relative value set-up with excellent entry levels, asymmetric payout profile and a long history of return outperformance.  EUR vs. SGD implied correlations have recovered smartly from their Q1 lows towards 60%, and odds are that future realized corrs would fall short of this high bar as they have usually done in years past.