SGD: Singapore Dollar Soars After Hawkish Adjustment To S$NEER Policy Band
The Singdollar soared as the local monetary authority tightened policy by re-centring and slightly raising the slope of the Singapore dollar nominal effective exchange rate (S$NEER) policy band, while keeping its width unchanged.
- In its monetary policy statement, the MAS warned that "in the quarters ahead, consumer price inflation in Singapore will increase by more than previously anticipated." The Monetary Authority revised its 2022 CPI and core CPI inflation forecasts to +4.5-5.5% (prev. +2.5–3.5%) and +2.5–3.5% (prev. +2.0–3.0%) respectively.
- Note that all 16 economists surveyed by Bloomberg predicted that the MAS would tighten policy, but they disagreed on which of the three S$NEER band tools would be used. All but one forecast the steepening of the band's slope and half of them anticipated its re-centring, with the latter likely behind the Singdollar's reaction rally.
- Raising the slope of the currency band is the most commonly tool used by the MAS, while re-centring effectively represents SGD devaluation and is normally used to respond to near-term pressures. Widening the S$NEER band is least frequently used and serves to manage currency volatility.
- The MAS statement was released alongside Singapore's advance Q1 GDP data, which suggested that the economy grew 3.4% Y/Y in the three months through Mar 31, missing the median estimate of +3.8%.
- Spot USD/SGD tumbled in defiance of recent technical signals. It dipped well past the neckline of a double bottom structure, suggesting that the pattern has failed. The sharp sell-off comes despite the completion of a golden cross earlier this week.
- The rate last changes hands at SGD1.3569, down 55 pips on the day. The key near-term support has been defined at SGD1.3522, which limited losses on Mar 31. Bulls need to reclaim Apr 11 high of SGD1.3673 before setting their sights on Mar 15 high of SGD1.3688.
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THAILAND: Snap Poll "Likely Early Next Year": Bangkok Post
Thailand's parliament could be dissolved after November's APEC summit with a snap election likely to take place early next year, an anonymous source told the Bangkok Post.
- This view was reportedly conveyed by Deputy Prime Minister and ruling Palang Pracharath Party (PPRP) leader Prawit Wongsuwon to minor coalition partners yesterday evening.
- Prawit has reportedly invited leaders of minor coalition parties to a meeting with Prime Minister Prayuth Chan-o-cha this Thursday.
- Click here to view the full article.
JPY: Out Of Favour
Participants dumped the yen Monday as latest communique surrounding Russo-Ukrainian talks offered some hope for progress, despite Moscow's continued atrocities on the ground. Firmer U.S. Tsy yields helped push USD/JPY higher, with the rate piercing the Y118.00 figure on its way to fresh multi-year highs.
- The rate operates at Y118.26, up 7 pips on the day, with topside focus falling on Jan 4, 2017 high of Y118.19. A breach of that level would open up Jan 3, 2017/Dec 15, 2016 highs of Y118.60/66. Bears look for a pullback under former resistance area located at Y116.35/34.
- LDP lawmakers told Kyodo that the party will hold internal discussions on nuclear weapons sharing with the U.S., despite PM Kishida's explicit pushback against the idea.
- Trade balance & final industrial output (Wednesday), core machine orders (Thursday) & national CPI (Friday) take focus on the data front this week. Elsewhere, the BoJ will deliver its monetary policy decision on Friday.
AUD: Finding Poise After Sharp Sell-Off, RBA Minutes Eyed
The combination of China's worsening Covid-19 situation, weaker than expected yuan fixing, and easing crude oil prices pulled the rug from beneath the Aussie dollar Monday. With the greenback supported by firmer U.S. Tsy yields, AUD/USD sank to its worst levels this month.
- The rate has lodged some modest gains this morning and last trades at $0.7200, up 12 pips on the day. A clearance of Mar 10 high of $0.7368 would shift focus to Mar 7 high of $0.7441. Conversely, bears look for a slide through Feb 25 low of $0.7141 towards Feb 24 low of $0.7095.
- Australia's ANZ Roy Morgan Weekly Consumer Confidence fell to 95.8 from 100.1, while accompanying commentary flagged that "inflation expectations jumped to 5.6% last week, its highest level since November 2012."
- Australian house price data will hit the wires later today, alongside the minutes from the RBA's most recent monetary policy meeting. China's monthly economic activity data will also provide interest.
- Later this week, focus will turn to Australia's labour market report, due Thursday.
