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KUALA LUMPUR (July 29): The Singapore dollar on Friday (July 29) appreciated to its strongest level against ringgit at RM3.2321 per Singapore dollar at 2.31pm.
The ringgit later cut losses against the Singapore dollar to close at RM3.2269. Currently, an RM1 can be exchanged for 31 Singapore cents.
Year to date, the Singapore dollar has strengthened by 4.58% against the ringgit from the last price of RM3.0857 on Dec 31, 2021.
UOB strategists, in its monthly foreign exchange and rates strategy note released on Friday, said that the Singapore dollar is the distinct and unique safe haven currency within Asia FX (foreign exchange).
“Given the risk of even further tightening of the S$NEER (nominal effective exchange rate) by the Monetary Authority of Singapore (MAS) in October, we see the Singapore dollar maintaining its relative trade weighted strength.
“As such, we see the US dollar against Singapore dollar capped at 1.40 through 2Q23 (second quarter of 2023),” UOB said.
As for the entire Asia FX bloc which include the New Taiwan dollar, South Korean won, Philippine peso, ringgit, Indonesian rupiah and Thai baht, UOB advised caution as it saw further weakness.
“In view of China’s ongoing growth slowdown, we continue to see further CNY (Chinese Yuan) weakness to 6.9 against the US dollar by 1Q23 (first quarter of 2023),” it said.
UOB highlighted that a pullback in crude oil and palm oil prices — both Malaysia’s key exports — added to the headwinds hitting the ringgit.
“As such, we continue to expect further weakness in the ringgit and lift our US dollar against ringgit forecasts to 4.49 in 3Q22 (third quarter of 2022), 4.52 in 4Q22 (fourth quarter of 2022), 4.53 in 1Q23 and 4.54 in 2Q23. They were previously at 4.46, 4.48, 4.5 and 4.52 respectively,” it said.
UOB noted that the ringgit had touched 4.46 against the US dollar in July, the lowest level since Jan 2017.
On Friday, the US dollar depreciated against the ringgit at 4.4508. At 6.12pm, it depreciated against the Singapore dollar at 1.3797.
OANDA Asia Pacific senior market analyst Jeffrey Halley said in a Friday note that Asian currencies finally started strengthening versus the US dollar overnight after weak US data pushed US yields lower as recession fears heightened.
“US GDP (Gross Domestic Product) had a nasty surprise for everybody overnight, unexpectedly falling by 0.9%, when market expectations were for a modest 0.5% gain,” said Halley.
He added that this marked two consecutive negative quarters of US growth, putting the US now in a technical recession.
The US commerce department announced in its advance estimate that GDP fell at a 0.9% annualised rate in the second quarter. The economy had contracted at a 1.6% pace in the first quarter.
In response, Halley said the Korean won led gains, falling to 1,295 overnight, but the Thai baht, Singapore dollar, and Indonesian rupiah also booked decent gains.
“Some profit taking this morning has seen the US dollar fall against the Korean won and the US dollar against the Thai baht climbed 0.30% higher. It does look like some regional Central Banks are taking advantage of a weak US dollar today to push their currencies higher,” he said.
He also observed the US dollar against the Indonesian rupiah plunged below 15,000.00 to 14,955.00 overnight and tumbled another 0.70% to 14,850.00 on Friday, and the US dollar against the Philippine peso plunged by 1.05% to 55.22 on Friday morning.
“I am assuming that both BI (Bank Indonesia) and BSP (Bangko Sentral ng Pilipinas) are selling US dollars, and I would not be surprised to see the RBI (Reserve Bank of India) doing the same this afternoon.
“Timing, after all, is everything. With China, European, and US recession risks multiplying, the jury is still out as to whether we have seen the worst of the Asian FX sell-off,” Halley warned.
Read also:
Ringgit-Singapore dollar rate notches new record at 3.2255
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