SGD: USD/SGD Close To Decade Lows, Export Trend Supports NEER

USD/SGD tracks at session lows in latest dealings, the pair last near 1.2945. This is very close to intra-session lows from Monday's session. These levels in USD/SGD were last seen back in the latter stages of 2014. Possible downside targets in the pair may rests near the 1.2800 region, which marked a number of highs through the 2013/14 period. Like some other pairs in South East Asia FX, USD/SGD is comfortably sub its 20-day EMA, which is back near 1.3050.

• The earlier August trade data showed export growth slightly below expectations but still positive in y/y terms at 10.7%. Encouragingly, electronic exports were the standout at +35.1%y/y. This broadly fits with trends from other export orientated economies in the region, like South Korea and Taiwan, where the tech side has been a source of strength for export growth.
• A resilient export growth backdrop suggests little need for a MAS policy shift later this year. The chart below plots the SGD NEER y/y changes against smoothed export growth (pushed forward by 6 months). Ultimately, we may see easier policy settings, given global trends and lower domestic inflation pressures in Singapore, but the MAS is unlikely to be a leader in terms of the easing cycle. Note next week delivers August CPI data (due on Monday).
• Per Goldman Sachs, the SGD NEER is around 0.27% from the top end of the policy band, so markets aren't pricing in a sharp shift in the MAS outlook in the near term.

Fig 1: SGD NEER Versus Singapore Export Growth Y/Y (6 Months Forward)