Singapore dollar continues to rise on accelerated US dollar profit-taking

The Singapore dollar stayed on the rebound against the US dollar on Thursday in line with other currencies, reaching S$1.43 as dollar profit-taking gathers momentum.
PHOTO: ST File Photo

Singapore - The Singapore dollar stayed on the rebound against the US dollar on Thursday in line with other currencies, reaching S$1.43 as dollar profit-taking gathers momentum.

At S$1.43, the Singdollar is up 1.4 per cent from S$1.45 on Tuesday, noted Philip Wee, DBS Bank senior currency strategist.

The dollar has been struggling since the waning days of 2016, and the profit-taking and correction is pretty much across the board, he said.

The dollar's index against a basket of six major currencies slipped to 102.20 after hitting a 14-year high of 103.82 on Tuesday, when a strong reading from a US manufacturing survey gave it a boost.

The Chinese yuan slipped a tad after it made its biggest daily gain in about a year in offshore trade on Wednesday, as the Chinese authorities took steps to shore up the currency.

Things Singapore investors should know after US election

  • Donald Trump (shockingly) won the US election. As far the financial markets are concerned, here are eight things that all Singapore investors should know about.

  • 1. Gold price is going up

    Trump's victory has already seen a flight towards gold, as investors seek safe haven for their money.

  • 2. Uncertainty will cause sell-off, stock markets will drop

    Investors, both institutional and retail, hate uncertainty, and that uncertainty is going to cause sell-off, leading to price drop across global equity markets.

  • 3. Panic leads to opportunity?

    Remember the famous Warren Buffet quote, "be fearful when others are greedy, and greedy when others are fearful"? Well, you can now put this to the test.

  • 4. Watch the US Dollar closely

    While the popular sentiment is that the USD is going to depreciate as a result of Trump's victory in the short-run, the long-term performance of the USD is very much subjective still.

  • 5. Look out for local companies that deal heavily in US contracts

    The uncertain future of the USD will be one to keep watch on, particularly for investors who own local stocks that have their contracts in USD.

  • 6. Bonds to be in demand again

    With investors fearing that Trump's election will bring global uncertainty, prices of treasury bonds across the globe has seen a spike in price.

  • 7. High quality dividend stocks might be in play

    There are many good local blue-chip companies that have been through recessions after recessions. They still continue to do well till today. Stick to them.

  • 8. Avoid panicking

    The stock market is full of ups and downs, as it fluctuates largely based on human emotions.

  • We have already seen a shocking poll result earlier this year when the UK voted to exit the EU. As expected, markets sell-off were immediate. But life still have to go on. We still have to invest for our future and our retirement.

The Thomson Reuters/Hong Kong Exchange index of the offshore yuan hit its highest level in almost six months, though the index for onshore yuan still stood within its ranges of the past few weeks.

The offshore yuan gained 1.3 per cent on Wednesday, hitting a one-month high of 6.8658 per US dollar. It last stood at 6.8883.

"The whole rally has been on Trump growth and interest rates and Fed hikes . . . the position has been pretty extended," said Mr Wee.

The US Federal Reserve raised interest rates last month and expectations are for three more hikes in 2017. The dollar and stock markets have rallied strongly since Donald Trump won the US presidential election on Nov 8 on reflation hopes but also on data which shows the US economy is growing nicely. Mr Trump takes office on Jan 20.

While bullish on the dollar over the medium term, the market is worried that it has run up too much too quickly, said a DBS research report.

But the market is also seeing more numbers coming out which show that other economies aren't doing too badly, for example, Singapore's latest growth data, said Mr Wee.

On Tuesday, Singapore surprised with 1.8 per cent 2016 growth, surpassing even the government's own 1-1.5 per cent range estimate.

"There's a balancing effect right now, I would say the market is evaluating - it's not so one-sided, the rest of the world is tagging along," said Mr Wee.

The Singdollar has had a fantastic 24 hours, with the greenback falling against it from 1.4500 to 1.4320, said Jeffrey Halley, OANDA senior market analyst. "In the process, breaking support around 1.4430 and 1.4350. These now become resistance. Support is at 1.4320 and then 1.4270 and 1.4220," said Mr Halley.

Mr Wee said that the broad trend of further dollar strength hasn't changed. "The US optimism is high."

DBS forecasts four hikes by the Fed in 2017 and the Singdollar to fall to S$1.48 by the fourth quarter of the year.

This article was first published on Jan 6, 2017.
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