The Singapore dollar climbed to a one-month high this week as disappointment with US President-elect Donald Trump's first press conference since July decked the greenback.
In the wake of Trump's surprise election win, the US dollar index, which measures the greenback against a basket of currencies, climbed to a 14-year high.
That sent the Singapore dollar tumbling to its weakest since 2009, during the global financial crisis, with the greenback fetching as much as 1.4545 Singapore dollars.
But Trump's press conference on Wednesday disappointed markets, with the president-elect continuing to push trade protectionism and criticising individual companies, while providing few details on his planned infrastructure or other programs.
The US dollar lost ground, falling as low as S$1.4211. At 12:56 p.m. HK/SIN, the dollar was fetching S$1.4277.
To be sure, in a note on Friday, Mizuho pointed to the pair remaining a "still four big figures" above its 1.38-1.39 level before the play on "Trump-flation," or expectations that Trump's policies would spur an acceleration of inflation.
But the Singapore dollar's bounce was big enough that ANZ said in a note on Thursday that it closed its long dollar/Singapore dollar position.
The bank noted that disappointment over Trump's press conference sent the pair down to its stop-loss level of 1.4250. But it added that it would look for the opportunity to re-enter a long position as it expected the Singapore dollar NEER, or nominal effective exchange rate, was around the mid-point of its policy band.
With monetary policy in the US and Singapore diverging - the US looks set to tighten further, while the Monetary Authority of Singapore (MAS) was more dovish - ANZ expected the Singapore dollar NEER might head toward its lower bound.
The Singapore dollar isn't entirely free-floating. The central bank sets its monetary policy via an undisclosed trading band for the currency based on a basket of currencies weighted to reflect trade levels with the city-state. The MAS may intervene if the currency moves outside its band.
Credit Suisse also expected the Singapore dollar would resume its downtrend, advising selling when the currency bounces or using it as a funding currency.
"We think Singapore's macro fundamentals justify an easing bias," Credit Suisse said in a note on Wednesday.
While the city-state's preliminary fourth-quarter gross domestic product (GDP) came in higher than forecasts, the bank didn't expect the bump up would be sustainable.
"Higher US rates, potential US-China trade disruption, and less expansionary Singapore fiscal policy are likely to weigh on growth prospect in 2017 relative to 2016," it said, adding it expected the MAS to re-centre the NEER downward.
Singapore's economic growth surged in the fourth quarter, rising 1.8 per cent from a year earlier, handily beating a Reuters forecast for a rise of just 0.6 per cent. On a quarterly basis, gross domestic product (GDP) jumped 9.1 per cent.
For the full year, Singapore's economy grew 1.8 per cent, beating forecasts, but still the lowest since 2009, during the global financial crisis. The government had forecast 2016 GDP growth at 1.0-1.5 per cent.