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SGD: Stay short – ANZ

SGD: Stay short – ANZ

Khoon Goh, Head of Asia Research at ANZ, suggests that despite recent improvement in Singapore’s economic growth, they continue to favour staying short SGD as they expect MAS to remain neutral for a prolonged period and see scope for the S$NEER to retrace lower.

Key Quotes

“Our view towards SGD has not changed, even with the S$NEER backing off recent highs. Though Singapore’s Q2 GDP growth was revised up and the Ministry of Trade and Industry narrowed their 2017 full year growth forecast to 2-3% from 1-3% previously, we do not see recent improvements altering the current MAS neutral monetary policy stance.”

“There are no upside pressures on inflation in Singapore, apart from administrative price rises such as the increase in water prices from July, which will push headline CPI higher. The labour market remains weak, despite the headline unemployment rate easing to 2.2% in Q2 from 2.3% in Q1. The headline unemployment rate masks a deterioration in the labour market. Employment contracted for the second consecutive quarter by 7.8k (following a 6.8k contraction in Q1). If we exclude foreign domestic workers, the decline in employment was even larger at 8.4k. The weak state of the labour market mean core inflation pressures will remain subdued, and MAS policy is set to stay neutral for some time. We do not see an exit from the neutral policy stance until there is a substantial improvement in the labour market.”


To express our SGD view and to partially remove the dollar risk, we recommend going short 3m SGD/IDR forward at 9916 (spot reference 9801), targeting 9700 with stop-loss at 10000. IDR is one of our preferred currencies in the region and offers attractive carry.”

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