USDSGD call

Come Thursday 9 Apr '09 *correction: Tue 14 Apr 09*, the Monetary Authority of Singapore or MAS will end their bi-annual meeting and issue a statement of currency guidance for until the next meeting.

Usually guarded and secretive, officials usually don't speak to the press like their foreign counterparts, but this time around, there is some market expectations for a statement of SGD depreciation.

In official terms, there could be a re-centering of the band lower.

Right now the SGD trades just slightly below the middle of the SGD NEER band (which is a measure of the strength of the SGD against a basket of currencies Singapore trades mainly with). The lower the SGD is in the band, the weaker it is. Re-centering the band lower effectively depreciates the SGD a tad.

With demand for Singapore's exports having crashed to the ground, as seen in the last 3 NODX measures, the government can ease the difficulties faced by exporters by helping them to be more competitive. Exports make up 70% of the island state's GDP.

Last year, when inflation was sky-rocketting, the MAS steepened the band and then lifted it higher to contain price rises, a drastic move by any count.

This year, inflation has declined sharply led by oil prices, so the need to keep the SGD at a high level is reduced.

My call for the USDSGD for the next week is to buy on dips (as the EUR makes its move higher) from 1.4950 (support level from mid Jan to early Feb), with stop loss at 1.4880. Take profit at around 1.5200.

Of course, if the MAS does not re-center or mention anything about depreciation, I'd revise this view.