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(Bloomberg) -- Singapore's currency looks set to remain under pressure as global headwinds outweigh the benefits of an easing in the nationwide lockdown.

The U.S. dollar-Singapore dollar pair has failed to break below technical support at its one-month low, suggesting its next move could well be higher. Data this week is expected to show the nation's economy contracted 1.8% y/y in the first quarter, according to the median estimate of economists in a Bloomberg survey.

The Southeast Asian currency has been pressured by the negative impact of the coronavirus on the Singaporean economy and is down over 5% against the greenback so far this year. The government is projecting gross domestic product will shrink 1%-4% in 2020.

"We see significant challenges ahead for the Singapore dollar, given Singapore is one of the most open economies in the region," said Standard Chartered Plc. strategist Divya Devesh. "Given the subdued outlook for global growth and global trade, and a sharp decline in global manufacturing PMI's, we expect the recent improvement in Singapore's non-oil domestic exports to reverse course."

The nation's exports unexpectedly climbed for a second straight month in April, mainly due to a jump in pharmaceuticals, according to data released on May 18. The government said the shipments tend to be volatile and fluctuate across months.

Also keeping the local dollar under pressure is the willingness signaled by the Monetary Authority of Singapore to let the currency weaken at its March 30 policy decision, in a bid to support the trade-reliant economy. The MAS doesn't set rates, but instead manages the currency against major trading partners as a policy tool.

The Singapore dollar's nominal effective exchange rate -- the focus of the MAS -- began May at a similar level to where it was at the time of the March policy decision, suggesting there is still room for the currency to weaken further.

The U.S. dollar-Singapore dollar pair traded at 1.4222 on Friday at 5:20 p.m. local time, more than 1% above its April 30 low of 1.4070. Its failure to breach this support leaves the door open for a grind higher toward technical resistance at the April 6 high of 1.4417.

Still, pressure on the currency should be alleviated somewhat as the domestic economy starts to pick up with Singapore allowing more businesses to reopen on June 2. That will increase the active proportion of the economy to three-quarters -- after a nationwide lockdown cut transmission of the coronavirus among citizens and permanent residents.

Below are the key Asian economic data and events due this week:

Monday, May 25: No major economic releases

Tuesday, May 26: Singapore industrial production, CPI and 1Q GDP, New Zealand trade balance, Japan all industry activity index, South Korea consumer confidence

Wednesday, May 27: Australia 1Q construction work done, RBNZ's financial stability report and press conference, China industrial profits, South Korea manufacturing/non-manufacturing business surveys

Thursday, May 28: Australia 1Q private capex, New Zealand business confidence, Bank of Korea rate decision

Friday, May 29: India 1Q GDP, Australia private sector credit, New Zealand consumer confidence, Japan retail sales, industrial production, jobless rate, consumer confidence and Tokyo CPI, South Korea industrial production, Thailand trade balance and BoP current account balance

©2020 Bloomberg L.P.

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Singapore Dollar Looks Vulnerable Even as Economy Opens Up - BNN Bloomberg

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(Bloomberg) -- Singapore's currency looks set to remain under pressure as global headwinds outweigh the benefits of an easing in the nationwide lockdown. The U.S. dollar-Singapore dollar pair has failed to break below technical support at its one-month low, suggesting its next move could well be higher.

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Benchmark set at Q1 of 2021. Return of Singapore's economy

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Benchmark set at Q1 of 2021. Return of Singapore's economy

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Singapore amongst the last to recover from COVID-19: analyst

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The region will likely go back to its pre-COVID levels by Q1 2021.

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5.7%. The GDP forecast for the years reduction 

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5.7%. The GDP forecast for the years reduction 

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Singapore's decision to keep a large segment of its economy closed and many of its residents at home for another month will lower economic growth and raise job losses, said analysts.

DBS Bank became the latest to cut its estimates of how Singapore's gross domestic product and employment would pan out this year, after earlier downgrades by OCBC Bank, UOB Group and Maybank.

DBS now expects the economy to shrink 5.7 per cent this year, a far steeper fall than the 2.8 per cent drop it had predicted earlier.

Retrenchments may spike to 45,600, far higher than in any of the past recessions, while the resident unemployment rate could rise to a seasonally adjusted 4.2 per cent, said the bank.

Should Singapore fail to contain the outbreak by the end of the circuit breaker on June 1, GDP could shrink by as much as 7.8 per cent, said the bank's senior economist Irvin Seah in a report yesterday.

The circuit breaker was extended after a spike in infections at dormitories housing foreign workers, pushing the number of Covid-19 cases in Singapore to the highest in South-east Asia.

The tighter new measures will take a heavier toll on businesses already struggling with poor earnings and weak cash flows, DBS said.

The Government has offered more help to businesses and their employees, taking the total fiscal response to the pandemic to $63.7 billion.

Without government help, the economic pain could have been even more acute, Mr Seah noted, adding that services and construction are two sectors that will be hardest hit by the circuit breaker extension.

"The extension to June 1, though necessary to contain the outbreak, will be a nail in the coffin for many locally oriented industries, for example, construction, retail, F&B, business services."

The relief measures will help, but some businesses on a weaker financial footing may not survive this crisis - implying a spike in companies folding up, bankruptcies and job losses ahead, Mr Seah said.

Though resident workers account for about 62 per cent of the total workforce, DBS senior economist Irvin Seah said, proportionately fewer local workers are likely to be retrenched on account of policy measures aimed at safeguarding their jobs.

Companies may have to shed more headcount to bring manpower costs in line with the fall in earnings, he added.

Though resident workers account for about 62 per cent of the total workforce, he said, proportionately fewer local workers are likely to be retrenched on account of policy measures aimed at safeguarding their jobs. He added that while foreign workers will account for the bulk of the retrenchments, resident unemployment will still rise.

DBS Bank's GDP growth estimates for the year are now lower than government guidance of minus 4 per cent to minus 1 per cent.

As for other banks' GDP predictions, some are more dire than DBS' while others are rosier. OCBC expects Singapore to suffer an even more severe recession. Ms Selena Ling, its head of research and strategy, said a contraction of 6 per cent to 10 per cent cannot be ruled out.

The bleaker end of the range assumes that a recovery may be delayed as business and consumer confidence remains dented into the third quarter and any second-half stabilisation is even more subdued than earlier expected, she said.

UOB economist Barnabas Gan downgraded Singapore's growth to minus 4 per cent, down from a previous estimate of minus 2.5 per cent. Maybank has cut its GDP forecast for this year to minus 7 per cent, from minus 6 per cent, due to the extension of the circuit breaker.

It sees a much larger impact on employment, with job losses expected to reach 200,000. More than half of those losses will be borne by foreigners, Maybank analyst Chua Hak Bin said last week.

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Coronavirus: DBS expects Singapore's GDP to shrink by 5.7% this year

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Singapore's decision to keep a large segment of its economy closed and many of its residents at home for another month will lower economic growth and raise job losses, said analysts. DBS Bank became the latest to cut its estimates of how Singapore's gross domestic product and employment would pan out this year, after earlier downgrades by OCBC Bank, UOB Group and Maybank.

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Growing consternation towards a heavy recession, more harmful that SARS effect.

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Growing consternation towards a heavy recession, more harmful that SARS effect.

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Singapore

THE Singapore dollar plunged to 1.40 against the US unit on Thursday, reflecting growing recession fears as new reported cases of Covid-19 - while slowing down inside China - seem to be picking up pace in the rest of the world.

The SGD's slide on Thursday was in tandem...

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Sing dollar breaches 1.40 against USD as recession concerns grow

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THE Singapore dollar plunged to 1.40 against the US unit on Thursday, reflecting growing recession fears as new reported cases of Covid-19 - while slowing down inside China - seem to be picking up pace in the rest of the world. Read more at The Business Times.

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Singapore Sees Negative Rates Creep In With Flush Liquidity

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Singapore is just a whisker away from joining the global negative-interest rate club.

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Fitch Solutions forecasts the Singapore Dollar to suffer further. 

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Fitch Solutions forecasts the Singapore Dollar to suffer further. 

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Fitch Solutions has lowered its forecast for the Singapore dollar's 2020 average exchange rate to $1.425 per US dollar, from its previous average forecast of $1.385, in the light of the Covid-19 crisis.

The market insights firm yesterday said the currency has "clear prospects of sustained weakness" over the course of this year, given that the risks posed by the coronavirus pandemic are likely to persist through most of the year.

This could see the Singapore dollar continue to trade within the weaker short-term trading range of between $1.41 and $1.45 per US dollar over the coming months, and between $1.34 and $1.45 in the coming quarters.

Fitch noted Singapore's currency has weakened further since the firm's February update, in line with its expectations for the pandemic to exert depreciatory pressures.

As of last Tuesday, the Singdollar was averaging $1.3943 against the US dollar for its year-to-date average exchange rate, 0.7 per cent weaker than Fitch's previous average forecast of $1.385 for the year.

According to Fitch, the growing Covid-19 caseload in the Republic is likely to keep the currency on a weakening path, especially with the circuit breaker being extended till June 1. "This would weigh on growth as well as confidence towards Singapore's management of the crisis," Fitch wrote.

That being said, though there had been a doubling in the number of confirmed cases in one week since April 20, the Singdollar remained mostly stable during that time. Between April 20 and April 27, it traded close to $1.42 per US dollar.

The currency's relative resilience, following a sell-off in the middle of March, suggests the Monetary Authority of Singapore is unwilling to allow the exchange rate to depreciate much further than current levels, Fitch said. "We expect the central bank to continue supporting the currency over the coming months," it added.

For next year, Fitch yesterday revised its 2021 average exchange rate forecast downwards to $1.41 per US dollar from its earlier forecast of $1.37, given the weaker position that the currency will likely be in by the end of this year.

"We maintain a slightly more sanguine long-term outlook for the SGD (Singdollar), given our expectation that Covid-19-related risks would have at least begun to recede by the end of 2020," the firm wrote.

"We continue to expect the likely economic recovery in 2021 to support a stronger SGD, but note that any upside will be limited by factors such as Singapore's diminishing growth advantage over the US."

Fitch forecast a growth rate of 2.6 per cent for Singapore next year, and 3 per cent for the United States.

Downside risks to Singapore's short-and long-term exchange rate forecasts include a second large Covid-19 outbreak within the local community or a longer-than-expected timeline to control the spread of the virus among foreign workers living in dormitories.

These could lead to further extensions of circuit breaker measures in Singapore beyond June 1, which would imply further negative shocks to the city state's already battered economy, Fitch said. This could, in turn, shake investor confidence further and spark another sell-off of the currency, it added.

Next year, there are also risks that the Singdollar would suffer, if the global economy struggles to get back on track post-pandemic due to factors such as spiking unemployment in key economies, including the US.

This would likewise weigh on Singapore's small and open economy and thus its currency, Fitch noted.

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Fitch Solutions lowers Sing$ average forecast on virus risks

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Fitch Solutions has lowered its forecast for the Singapore dollar's 2020 average exchange rate to $1.425 per US dollar, from its previous average forecast of $1.385, in the light of the Covid-19 crisis.

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The MAS is focusing on an export driven economy in order to get back up and running. 

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The MAS is focusing on an export driven economy in order to get back up and running. 

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The Monetary Authority of Singapore (MAS) yesterday eased its policy stance to help the economy brace itself for a deep recession due to the coronavirus outbreak.

In a widely expected move, the central bank reduced the Singapore dollar's rate of appreciation to 0 per cent.

In recent years, the Singdollar has been allowed to appreciate mildly against a basket of currencies.

The central bank also effectively lowered the mid-point of its currency band downwards, suggesting that it will allow for a weaker exchange rate to support export-driven growth.

The last time MAS lowered the band's centre was during the global financial crisis in 2009.

It was also the first time since at least 2001, when the first monetary policy statement was released, that MAS has taken both policy measures together.

The MAS move will stabilise the exchange rate and help businesses access badly needed credit to tide over the deteriorating economic conditions at home and abroad.

MAS uses the Singapore dollar's nominal effective exchange rate (S$Neer) as its main policy tool rather than interest rates because Singapore is a small and open economy heavily dependent on trade.

The S$Neer is the exchange rate of the Singapore dollar managed against a trade-weighted basket of currencies of the nation's major trading partners.

MAS said in its policy statement: "With the deterioration in macroeconomic conditions and expectations of a weaker outlook, the S$Neer has depreciated to a level slightly below the midpoint of the policy band."

MAS said it will adopt a 0 per cent per annum rate of appreciation of the policy band starting at the prevailing level of the S$Neer. There will be no change to the width of the policy band.

"This policy decision hence affirms the present level of the S$Neer, as well as the width and 0 per cent appreciation slope of the policy band going forward, thus providing stability to the trade-weighted exchange rate," MAS said.

The Singapore dollar has been volatile in the past weeks, along with global financial markets.

The currency hit a low of 1.4650 versus the United States dollar on March 23, before rebounding to 1.4268 last Friday.

The Singapore dollar traded marginally lower against the greenback after the policy statement yesterday. Later in the day, it recovered to around 1.4262, up 0.04 per cent from its previous close.

The MAS move was also in line with the deteriorating global economic outlook and comes after other central banks embarked on a wave of monetary policy easing to calm volatile financial markets.

"The Covid-19 pandemic has led to a severe contraction in economic activity both in Singapore and globally due to the combination of supply chain disruptions, travel restrictions imposed in many countries and a sudden decline in demand," MAS said yesterday.

"The Singapore economy will enter a recession this year, with gross domestic product growth projected at minus 4 per cent to minus 1 per cent," it added.

MAS said its stable monetary policy stance also reflects the primary role of fiscal policy in mitigating the economic impact of Covid-19.

Given the rapid deterioration of the economic outlook, Singapore announced a supplementary budget of about $48 billion last week.

That was in addition to the stimulus package of $6.4 billion in the Budget unveiled last month, and puts the total at $55 billion.

MAS said the two Budget aid packages will help preserve jobs, while its money market operations will provide sufficient liquidity to the financial system.

Monetary policy will complement these efforts and ensure price stability over the medium term, it added.

DBS Bank's FX strategist Philip Wee said: "Lowering the Singapore dollar Neer would help to loosen financial and lending market conditions. For corporates, this would help cushion the impact from the coronavirus on profitability and credit spreads."

He said that the Singapore dollar may have seen its weakest level for 2020.

In year-to-date terms, it has depreciated 8.2 per cent against the US dollar so far this year. The only year that the local dollar weakened more than 10 per cent was during the 1997-98 Asian financial crisis.

Unless the present situation takes a turn for the worse, the Singapore dollar has scope to trade above the 1.40 level in the second half of 2020 in a post-coronavirus recovery, Mr Wee said.

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MAS eases Singdollar stance to help economy, spur export-driven growth

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The Monetary Authority of Singapore (MAS) yesterday eased its policy stance to help the economy brace itself for a deep recession due to the coronavirus outbreak. In a widely expected move, the central bank reduced the Singapore dollar's rate of appreciation to 0 per cent.

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SGD weakens with the impact of Covid 19 hit the whole world. 

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SGD weakens with the impact of Covid 19 hit the whole world. 

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SINGAPORE: The Singapore dollar weakened to a four-month low after the central bank said there's "sufficient room" for the currency to ease if the economy weakens due to the impact of the coronavirus.

The currency, which is maintained in a band against a basket of peers, has been fluctuating near the upper end of its boundary since October, and could ease, the Monetary Authority of Singapore said in a statement Wednesday. The MAS maintained its policy outlook and said it will meet in April, as scheduled.

Traders across Asia have been ratcheting up bets that central banks in the region will have to ease policies as the virus outbreak saps China's economy. Singapore, with its trade-dependent economy, may be susceptible to any prolonged impact that could freeze supply chains.

"The hit to the economy, both from tourism and supply-chain impact from China, has obviously opened the door to easing, " said Mitul Kotecha, senior EM strategist at TD Securities in Singapore. The Singapore dollar "has reacted negatively, extending its recent decline, and will likely remain under pressure as markets increasingly price in easing."

The Singapore dollar dropped as much as 0.9% to S$1.3824 against the U.S. dollar after the announcement. It's the worst-performing currency in Asia on Wednesday.

"There is sufficient room within the policy band to accommodate an easing of the Singapore Dollar Nominal Effective Exchange Rate (S$NEER) in line with the weakening of economic conditions" due to the virus outbreak, the MAS said in its statement.

The city-state already has been planning measures to shore up businesses and consumers still feeling the effects of the U.S.-China trade war and limp global demand. The virus has added to worries about the economic outlook in Singapore, where there are 24 confirmed cases of coronavirus.

The government is forecasting the economy should expand by 0.5%-2.5% this year after 0.7% growth in 2019. Finance Minister Heng Swee Keat has signaled that he will deliver a supportive budget on Feb. 18.

In its last scheduled announcement, in October 2019, the MAS eased policy for the first time since 2016 and said domestic growth -- particularly from manufacturing -- remained under pressure.

The MAS guides the local dollar against a basket of other currencies, adjusting the pace of appreciation or depreciation by changing the slope, width and center of a currency band. It doesn't disclose details of the basket, the band, or the pace of appreciation or depreciation. - Bloomberg

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Singapore dollar tumbles after currency easing room seen

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SINGAPORE: The Singapore dollar weakened to a four-month low after the central bank said there's "sufficient room" for the currency to ease if the economy weakens due to the impact of the coronavirus.

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Singapore Dollar/US Dollar

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Fundamental forecast = Qualitative Analysis            To arrive at your forecasted exchange rate, you need to consider various factors that would increase or decrease the exchange rate of the currency your group is assigned for.  

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Fundamental forecast = Qualitative Analysis            To arrive at your forecasted exchange rate, you need to consider various factors that would increase or decrease the exchange rate of the currency your group is assigned for.  