THE Singdollar is likely to continue strengthening till next year amid a broad weakness of the greenback, in particular against the Chinese currency. Read more at The Business Times.
Mr Chia said UOB's USD/SGD forecasts are 1.37 in Q320, 1.36 in Q420, and 1.35 in Q121 and Q221.
"Although our economic conditions remain under uncertain on a relative basis in the FX markets, Asian economies are seen coming out of the crisis faster. In the FX market, there are more people worried about the USD at this point." China is expected to rebound strongly to 3-6 per cent in H2 2020 after a 6.8 per cent contraction in Q1, which marked the country's first GDP decline since 1992. It then recovered to post a positive 3.2 per cent in Q2.
Singapore's strong fiscal reserves and its move to utilise it swiftly and decisively to support the economy has enabled the city-state - and, by extension, the SGD - to retain market confidence during this period of uncertainty, said currency economist Terence Wu of OCBC Bank."This provided the basis of the SGD to strengthen in line with broad USD weakness during this period. We expect the USD-SGD to continue to be moving in line with broad USD movements in the near term," he said.
The two key dominant drivers of accelerated sell-off in the USD over the past month are the spike in US money-supply growth from the massive Federal Reserve easing, as well as further deterioration in US debt load in the form of a much higher US debt-to-GDP ratio," it said. Ratings agency Fitch had responded promptly with a downgrade of US sovereign outlook to negative from stable, warning that"the outlook has been revised to 'negative' to reflect the on-going deterioration in the US public finances and the absence of a credible fiscal consolidation path".
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