DOLLAR-SING: VIEW: HSBC "estimate the SGD NEER has...>

DOLLAR-SING: VIEW: HSBC "estimate the SGD NEER has been hovering within a tight

range - 125-126 in index levels or 0-1% above the new mid-point of the policy

band - since the MAS MPS on 30 March. However, this is probably not due to

relatively balanced inflows and outflows. Rather, this range is likely a

manifestation of the MAS' intention of providing "stability" as stated in the

MPS. We believe the MAS has been leaning against SGD appreciation pressures -

its off'l reserve assets increased by a staggering US$22.6bn in April.

- We see several reasons behind the recent SGD appreciation pressures:

- 1. Large fiscal stimulus

- 2. Non-resident deposits have been rising quickly again.

- 3. The current account surplus has narrowed in Q120 but remains very large.

- In our view, even if the MAS continues to accumulate FX reserves to lean

against these pressures, we believe the SGD NEER could keep pushing towards the

stronger end of its recent range (0-1% above the mid-point). Taking into account

the recent broad USD correction too, accordingly, we now see USD-SGD at SGD1.39

by year-end 2020 (previous forecast: SGD1.41)."