Back
14 Oct 2015
SGD: MAS hits the ball in the middle – Deutsche Bank
FXStreet (Delhi) – Mallika Sachdeva, Strategist at Deutsche Bank, notes that in today’s highly anticipated policy meeting, MAS reduced the slope of the S$NEER policy band “slightly”, while keeping it on a “modest and gradual appreciation” path.
Key Quotes
“The +/-2% band-width and midpoint were kept unchanged. We now think MAS is running a 0.5% p.a. slope, down from 1% p.a. This could be the first time a non-integer slope has been used, having moved in larger 1% increments in the past, which might suggest growing policy flexibility.”
“MAS’ policy choice struck a balance between providing more support for growth, without letting down the guard on inflation, and while preserving policy space. Singapore avoided a technical recession today but MAS’ language on growth was more dovish seeing it as “slightly weaker than earlier envisaged,” and with “cyclical headwinds to persist”.”
“After a disruptive offcalendar slope reduction in January, we think MAS’ second easing of the year was designed, if anything, to minimize disruption to financial conditions. We could still see some unwind of more aggressive bearish SGD positions. There is now less of a compelling alpha case for SGD bears or bulls, with the ball back in the beta court.”
“We would now expect SGD FX and rates to trade with more of a beta to the performance of the trade-weighted USD basket and its blended rates. We recommended going flat on USD/SGD into MAS, and the policy decision has not provided a strong directional bias. With the market appearing stuck in a middling part of the USD smile, and scope for some positioning reduction in SGD, we could see a better dip to buy USD/SGD for medium-term players.”
Key Quotes
“The +/-2% band-width and midpoint were kept unchanged. We now think MAS is running a 0.5% p.a. slope, down from 1% p.a. This could be the first time a non-integer slope has been used, having moved in larger 1% increments in the past, which might suggest growing policy flexibility.”
“MAS’ policy choice struck a balance between providing more support for growth, without letting down the guard on inflation, and while preserving policy space. Singapore avoided a technical recession today but MAS’ language on growth was more dovish seeing it as “slightly weaker than earlier envisaged,” and with “cyclical headwinds to persist”.”
“After a disruptive offcalendar slope reduction in January, we think MAS’ second easing of the year was designed, if anything, to minimize disruption to financial conditions. We could still see some unwind of more aggressive bearish SGD positions. There is now less of a compelling alpha case for SGD bears or bulls, with the ball back in the beta court.”
“We would now expect SGD FX and rates to trade with more of a beta to the performance of the trade-weighted USD basket and its blended rates. We recommended going flat on USD/SGD into MAS, and the policy decision has not provided a strong directional bias. With the market appearing stuck in a middling part of the USD smile, and scope for some positioning reduction in SGD, we could see a better dip to buy USD/SGD for medium-term players.”