USD/SGD: NEERing 1.60 – RBC CM

Sue Trinh, Research Analyst at RBC Capital Markets, explains that after RBC recently brought forward the forecasted timing of the next Fed rate hike from mid-2017 to December 2016 which simply reinforces their long-standing, out of consensus target for USD/SGD to trade at 1.60 by Q2 2017 (consensus: 1.43, spot: 1.4340). 

Key Quotes

“SGD is much more vulnerable to rising USD and US interest rates than it was in the last Fed tightening cycle and is also one of the most exposed in AXJ to weak global demand.”

“We expect MAS to re-centre its exchange rate policy band and have had a long-held target for USD/SGD to trade at 1.60 in 2017 (consensus: 1.43, spot: 1.4340).”

“A short SGD position against a basket of EUR, MYR and USD could also prove attractive given it serves as a good proxy for the S$NEER basket, protects against directional USD moves and offers positive carry.”