USD/SGD: Neutral SGD NEER slope to dampen Singapore dollar gains – MUFG
|During 2020 the Singapore dollar strengthened against the US dollar from 1.3453 to 1.3211.
According to economists at MUFG Bank, neutral SGD NEER policy is likely to be maintained which should dampen Singapore dollar gains.
Key quotes
“The Singapore dollar’s modest appreciation despite the sharp decline in the dollar in 2020 reflected the impact of MAS’ neutral SGD NEER policy set in response to the COVID-19 shock. This neutral policy will set the tone for USD/SGD trading for the whole of 2021, setting constraints for Singapore dollar gains despite extended dollar weakness and potential improvements in current account surpluses. Further monetary easing is unlikely this year as fiscal policy is doing the heavy lifting.”
“Spillover effects from last year’s massive fiscal spending around 20% of GDP will continue to shore up economic growth in 2021. This, along with low base effects, should result in an economic rebound in 2021 with government estimates between 4.0-6.0% from 2020’s 5.8% contraction – the largest annual decline postindependence in 1965. External demand is expected to improve in 2021, thereby leading to wider current account surpluses after Q1-3 2020’s 14.5% YoY decline.”
“Domestic activity is expected to improve with inoculation underway since end-December and social distancing restrictions were eased further starting on December 28. Singapore started vaccination end-2020, and all residing in Singapore is expected to be vaccinated by end-Q3 2021.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.