USDSGD Jumps Over 100 Pips as the MAS Hints at Easing on Coronavirus Concerns
USDSGD is up over 100 pips from its opening price today. The currency pair surged in this morning’s trading following dovish remarks from the Monetary Authority of Singapore (MAS). It was initially trading around yesterday’s highs at 1.3718 but rallied to an intraday high at 1.3821 within an hour.
According to the central bank of Singapore, there is “sufficient room” within its current monetary policy stance to ease rates further. These remarks were triggered by the coronavirus outbreak which has led to the Chinese government putting some cities on lockdown. Consequently, efforts to contain the disease which has resulted to 24,516 confirmed cases and 493 deaths, has also led to business disruptions.
China is Singapore’s largest trading partner. Singaporean policymakers are concerned that a slowdown in the Chinese economy would also take its toll on theirs.
Unlike other central banks who adjust interest rates to control money supply, the MAS uses the exchange rate as its main tool. The Singapore Dollar Nominal Effective Exchange Rate or SGD Neer (S$NEER) measures the value of the Singaporean dollar against a basket of currencies. What these currencies are, the MAS does not disclose. The MAS allows for the S$NEER to trade within a specified range. If its value goes above that range, the central bank would sell Singaporean dollars to get its price lower. Conversely, if the S$NEER falls below that band, the MAS would buy their currency.
The central bank is not expected to make changes until its semi-annual meeting in April (the other being on October). However, today’s remarks suggest a downward adjustment on the S$NEER range is on the agenda.
On the weekly time frame, we can see that USDSGD is trading around its October 2018 highs. If buyers can sustain the rally, the next resistance level is around 1.3940 where the currency pair peaked in 2019.However, if the rally runs out of steam, USDSGD could fall between 1.3745 and 1.3790. These prices represent the 61.8% and 23.6% Fib levels when you draw the Fibonacci retracement tool from today’s low to its intraday swing high.More content