Singapore Dollar Holds Near 3-Week Lows

Singapore dollar holds near its weakest levels since mid-December, USD/SGD last marginally higher at 1.3310 after highs of 1.3325 yesterday.

• Singapore is setting up dedicated facilities to administer Covid-19 vaccinations daily to large groups of people, speeding up the vaccination rollout with the jabs already allowed to be taken at clinics and other established health-care facilities.
• An MUFG report released this week expects that gains in SGD will likely be capped by the Monetary Authority of Singapore maintaining neutral SGD NEER policy.
• "The Singapore dollar's modest appreciation despite the sharp decline in the dollar in 2020 reflected the impact of MAS' neutral SGD NEER policy set in response to the COVID-19 shock. This neutral policy will set the tone for USD/SGD trading for the whole of 2021, setting constraints for Singapore dollar gains despite extended dollar weakness and potential improvements in current account surpluses. Further monetary easing is unlikely this year as fiscal policy is doing the heavy lifting," says the report.
• However Deutsche Bank are more constructive on SGD, they believe positive vaccine infrastructure and a relatively rapid rollout in Singapore means SGD stands out among winners.
• Morgan Stanley are also positive on SGD, they note a further rebound in manufacturing is expected alongside a potential tourism recovery later in 2021, and proximity of SGD to the policy band.