Where next for the USD/SGD amidst Singapore GE2020?
The SGD could strengthen in the lead up to Singapore's general election, says one analyst.
The USD/SGD forex pair trended lower on Wednesday 24 June 2020 morning, a day after Singapore Prime Minister Lee Hsien Loong announced his decision to call for a general election next month.
The US dollar fell 0.25% against the SGD between 06:00 and 11:00 SGT to as low as S$1.38740, based on IG data.
Why the USD/SGD has been ‘drifting lower’
DailyFX Strategist Margaret Yang explained that the pair has been ‘drifting lower in the past two days mainly due to the dollar's own weakness and Singapore's election news’.
On Tuesday 23 June, Singapore President Halimah Yacob dissolved parliament and issued the Writ of Election, setting Nomination Day on 30 June and Polling Day on 10 July.
As Singaporeans head to the polls, Yang envisions upsides for the SGD in the upcoming months.
‘Traders are trying to price in the prospect of an election outcome with “no surprise”, which is likely to bring political stability to Singapore. As foreign capital flows back to emerging markets, (the) Singapore dollar will probably ride the tailwind and strengthen further,’ she said.
The USD’s weakness against a backdrop of improving risk sentiment, which saw the US Dollar Index decline for a second straight day, as Yang noted above, was also a factor in the USD/SGD falling.
The greenback had fallen broadly against most other majors overnight, bar the British pound.
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Better-than-expected Europe and US manufacturing data
According to OCBC FX strategist Terence Wu, better-than-expected June preliminary PMIs across Europe, as well as similar flash data out of the US, had ‘buoyed market sentiment, and provided reassurance that the global economy is on the mend’.
He further noted that there was ‘not much reaction on the SGD front’ regarding the dissolution of Parliament ahead of the General Elections, citing that the SGD nominal effective exchange rate (NEER) stood at 0.30% above the perceived parity (1.3922) this morning, moving largely within familiar ranges compared to previous sessions.
Looking forward, he wrote that the SGD NEER range remains ‘very contained, and that should bookend USD/SGD movements on an intraday basis’. He is expecting a 1.3860 to 1.3920 range for the USD/SGD, ‘roughly coinciding with the parity to +0.40% above parity range on the SGD NEER’.
As at 16:45 SGT on Wednesday 24 June 2020, the USD/SGD is trading at S$1.38875.
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Are you feeling bullish or bearish on the USD/SGD and other forex pairs? Either way you can buy (long) or sell (short) the asset using derivatives like CFDs offered on IG’s industry-leading trading platform in a few easy steps:
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