Singapore dollar slides across the board as data show dismal outlook

The Singapore dollar has fallen 0.64% against the USD this week, moving off a 4-month high of 1.3975 fetched earlier in the week.

Sigapore dollar
Singapore dollar Reuters

The Singapore dollar has dropped against most major currencies on Friday as surveys showed private sector growth is slowing and inflation outlook remains subdued in the island economy.

Despite the broad weakness in the US dollar, the Singdollar weakened against it. USD/SGD rose to a 10-day high of 1.4141 from the previous close of 1.4128, making a 0.09% decline for the local currency.

So far this week, the Singapore dollar has fallen 0.64% against the greenback, and moving off a 4-month high of 1.3975 touched earlier this week.

Charts, however, suggest that the pair is now testing a short term resistance and is most likely to fall back through 1.4050 and 1.3970 towards 1.3800, translating to new highs for the Singdollar.

In a survey released on Friday, IHS Markit said Singapore's private sector businesses remained pessimistic about their output levels in the year ahead. The survey also pointed to decreasing inflationary pressures while the business sentiment remained negative.

The pessimism is because of slowing economic conditions, geopolitical uncertainties and low growth in certain sectors such as marine engineering and construction, said Bernard Aw, IHS economist.

The Nikkei Singapore Purchasing Managers' Index came in at 51.4 for February, marginally lower than 51.6 in January as per Friday's data.

The Singapore Institute of Purchasing and Materials Management said on Thursday that their PMI reading for February was 50.9, down from 51.0 of January. The electronics sector PMI has dropped to 51.4 from 51.8.

Versus Rest Of Majors

The Singapore dollar seems to have started a clear move off the multi-month highs fetched versus the pound and the euro as well.

EUR/SGD rose to 1.4877 from Thursday's close of 1.4843. The Singdollar is set to end this week weaker, after four consecutive weeks of gains that had helped the local currency to fetch a 19-month high of 1.4801 last week.

On Friday, the GBP/SGD cross rose to 1,7364 from the previous close of 1.7329. It had touched a low of 1.7280 on Thursday which was a 1-1/2-month high for the Singdollar.

The Singapore currency also fell against the Japanese yen on Friday. SGD/JPY dropped to 80.77 from Thursday's close of 80.98, which was a near two-month high for the local unit.

The USD index,the gauge that measures greenback's trade-weighted strength against six major currencies, eased to 102.05 from 102.20 on the day. Thursday's high was a near two-month high for the USD index futures.

USD/SGD Technicals

Technically, the 1.4150 region seems to be a short term resistance for USD/SGD and if it fails to break through, the pair will fall back to 1.4050 and then 1.3970 soon. Such a move will most likely continue further south targeting 1.3800 before another short term bounce.

For the pair to have sufficient momentum upwards instead, it has to break through the current resistance and pass through 1.4250 so that such a move can significantly weaken the downtrend since January.