Sing Dollar steadies, key rate falls back to Dec levels

Sing Dollar steadies, key rate falls back to Dec levels

THE Sing dollar continues to steady as risk sentiment improves, leading to a retreat in a key interest rate back to December levels.

The SGD on Monday was quoted at 1.4286 against the US dollar at 6.33pm by Bloomberg, stronger than the 52-week high of 1.4408 on Jan 15.

The three-month swap offer rate (SOR) continued to fall. It was quoted at 1.456 per cent on Jan 22, taking it back to early-December levels. The high was 1.762 per cent on Jan 13. The SOR is usually used to price corporate loans.

The three-month Singapore interbank offered rate (Sibor), typically used for home loans, remained unchanged at 1.254 per cent.

"The easing in the 3-month SOR is probably a reflection of the improvement in global risk appetite since late last week which is also reflected in the SGD NEER (nominal effective exchange rate) retracing off from the weaker side of its parity band," said Selena Ling, OCBC Bank economist.

Central banks have been talking down volatility, trying to soothe battered markets.

"If you look globally, both the European Central Bank and Bank of Japan are hinting at additional monetary policy stimulus, while People's Bank of China has been actively injecting liquidity ahead of the Chinese New Year holidays," said Ms Ling.

"The fall in SOR can probably be attributed to the improvement in sentiment over the past two trading days," said Eugene Leow, DBS Bank economist.

"As Asian currencies including the SGD recover some lost ground against the USD, upward pressure on the SOR has eased somewhat," he said.

A sustained SGD recovery is not on the cards and the SOR is expected to resume moving north later.

Said Victor Yong, United Overseas Bank interest rate strategist: "We regard the recent SOR weakness as temporary since the backdrop of weak growth, low inflation and monetary policy divergence has not materially changed."

This article was first published on January 25, 2016.
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