Investors reduce bearish bets on Asian currencies for the first time in 7 months, turning bullish on the Singapore dollar
Singapore dollar bullish as investors reduce bearish bets on Asian currencies. Singapore's economic growth and inflation support the Singapore dollar, leading investors to turn bullish. The expected rate cut by the Federal Reserve is likely to boost the attractiveness of emerging market currencies, resulting in a decrease in bearish bets on Asian currencies. The Monetary Authority of Singapore seems in no rush to loosen monetary policy, with an economic growth rate of 2.9%. Analysts expect MAS to maintain a hawkish stance. The Singapore dollar's status as a safe haven for investors is solidified. Investors are awaiting macroeconomic data to confirm their bets
According to a survey released on Thursday by the Zhitong Finance and Economics APP, investors have turned bullish on the Singapore dollar for the first time since mid-December last year, supported by Singapore's economic growth and inflation situation. The survey shows that long positions in the Singapore dollar are at their highest level since early April 2023.
At the same time, the survey indicates that due to expectations of a rate cut by the Federal Reserve boosting the attractiveness of emerging market currencies, investors have eased their bearish bets on most Asian currencies. For example, short positions in the Malaysian Ringgit have now fallen to levels last seen in April last year, and short positions on the Philippine Peso and Thai Baht have also significantly decreased.
Market analysts suggest that the Monetary Authority of Singapore (MAS), the central bank of Singapore, does not seem eager to loosen monetary policy as Singapore's core inflation rate exceeded 3% in May, with second-quarter economic growth reaching 2.9%. MAS is set to conclude its policy meeting on Friday. Analysts expect that despite inflation hitting a two-year low in June, MAS will maintain its hawkish stance and keep its current policy settings.
Analysts at Bank of America stated in a report, "Strong data (economic growth and inflation) and the continued appreciation of the Singapore dollar's Nominal Effective Exchange Rate (SNEER) lead us to remain positive on the relative value of the Singapore dollar and low-yielding currencies in the Asian region." However, the analyst added that geopolitical events causing a surge in oil prices could pose upward pressure on the Singapore dollar's safe-haven status.
Singapore is one of the few countries globally with a AAA sovereign credit rating, reflecting its exceptionally strong fiscal and external balance sheet, factors that reinforce its status as a safe haven for investors.
Meanwhile, the market has already priced in expectations of a rate cut by the Federal Reserve in September. Investors are awaiting a series of macroeconomic data, including US second-quarter GDP and June PCE price index, to further confirm their bets