The Monetary Authority of Singapore, which uses the exchange rate as its main monetary policy tool, maintained an appreciating bias for the currency at its July meeting to rein in inflation. Singapore upgraded this year’s growth forecast last month to a range of between 2 per cent and 3 per cent, from an earlier band of 1 per cent to 3 per cent, citing a resilient external demand outlook, further underpinning the local dollar.
“Dollar-Singapore dollar continue to trade with a heavy bias as Powell’s speech at Jackson Hole gave markets greater conviction to sell dollars,” said Christopher Wong, a Singapore based FX strategist OCBC Bank Singapore.
However, further near-term gains for the Singapore dollar against the US dollar may be limited.
The Monetary Authority of Singapore focuses on the currency’s nominal effective exchange rate, referred to as S$NEER, which it allows to move within a policy band. OCBC’s Wong sees the S$NEER trading near the stronger side of its band, suggesting the Singapore dollar’s gains versus the US dollar may lag those of its peers.
