Singapore Dollar: Inflation keeps MAS tightening risk alive - Commerzbank

Commerzbank’s Henry Hao and Moses Lim highlight that Singapore’s August NODX growth was the strongest since 1998, driven by surging electronics and robust AI-related demand. They expect NODX to stay firm but moderate as base effects fade. With inflation projected to edge higher and growth solid, attention is turning to the upcoming CPI release, while USD/SGD has been supported by broad Dollar strength.

Robust exports and rising inflation risks

"August non-oil domestic exports (NODX) surprised to the upside, surging 46.2% yoy (Bloomberg consensus: 35.1%) vs 24.1% in July, the strongest growth since October 1998. While the electronics sector remained the primary growth driver, non-electronic NODX also staged a recovery in August. Year-to-date, NODX is up 22.4%, far above the government’s full-year forecast of 14-16%."

"Looking ahead, NODX growth is likely to remain firm, supported by AI-related demand and major consumer electronics launches. However, the pace of growth should moderate as base effects turn less favourable. Nonetheless, electronics are expected to remain the main driver, which could offset continued weakness in parts of the non-electronic sector."

"The focus now turns to August CPI, due on 23 September. Headline inflation is expected to rise to 2.3% yoy from 2.2% in July, while core inflation, which excludes private transport and accommodation costs, is projected to pick up to 2.2% vs 2.0% previously. If realised, this would be the highest core inflation reading in nearly two years."

"In FX, USD/SGD was steady around 1.2760, but rose 0.7% last week. This was largely driven by the broad strength in USD and elevated global oil prices."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)