Goldman: Stay Bullish SGD As We Expect The MAS To Be Hawkish In April

Goldman Sachs note that “the SGD has been one of the best-performing currencies in Non-Japan Asia (NJA) this year, underpinned by a hawkish central bank, a strong external position and Singapore’s economic reopening.”

• “Following our commodities team's upward revisions to commodity prices in early March, we revised down our 2022 GDP forecast for Singapore to 4.0% (from 5.1%). However, we still expect growth to be above-trend this year aided by reopening-related activities, such as high-touch consumer-oriented services, construction and travel. Meanwhile, we expect headline inflation to rise to 4.5% in 2022, above the MAS's inflation forecast band of 2.5%-3.5%.”
• “We forecast a 50bp hike to the SGD NEER policy band in April, coupled with a re-centering higher to the prevailing level of the SGD NEER at the time of the meeting. We also forecast a 50bp slope hike to the SGD NEER policy band in October. We estimate that the SGD NEER is trading 1.8%-1.9% above the mid-point of the MAS NEER policy band. A slope increase and an upward re-centering of the policy band would also give SGD NEER more room to appreciate going forward.”
• “We maintain our recommendation to be long SGD/TWD and have revised up our target and stop for this trade. Front-end rate differentials between SGD rates (whether looking at SOR or SORA curves) and USD rates have widened since late December, similar to past Fed rate hike cycles. We expect SGD front-end rates to continue to outperform USD rates in coming months.”