The USD/SGD exchange rate continued its uptrend this week as most emerging market currencies deteriorated against the US dollar. The pair rose to 1.3635, its highest level since May 1. It has risen by over 6.30% from its lowest level in October and formed a golden cross pattern, pointing to more gains in the near term.
Singapore’s industrial production falls
The Singapore dollar has retreated even as the economy continued doing well. The most recent data showed that the economy expanded by 5.4% in the third quarter, its highest growth momentum since 2022. This growth was higher than the median estimate of 4.1%.
As the financial services industry boomed, Singapore’s growth has happened, with many companies moving out of China. With Donald Trump set to tighten screws on China, there are signs that more firms will continue going to Singapore.
Singapore’s exports have continued to perform well. Non-oil exports increased by 3.40% in December after falling by 4.7% the previous month. Export growth may continue in 2025 since Donald Trump’s tariffs will lessen the country’s impact.
However, there are signs that some sectors are not doing well. Singapore’s industrial production dropped by 0.4% in November, translating to a YoY increase of 8.5%. That growth was lower than the median estimate of 10%.
Meanwhile, Singapore’s inflation has continued to drop this year. The headline Consumer Price Index (CPI) dropped from 7.5% in 2022 to 1.6% in November.
Therefore, analysts expect that the Monetary Authority of Singapore (MAS) will start cutting interest rates in 2025. Rate cuts help to boost the economy by lowering the cost of borrowing, making it more affordable for companies. MAS expects Singapore’s inflation to average between 1.5% and 2.5% next year.
Emerging market currencies fall after Fed decision
The USD/SGD pair has risen as emerging market currencies crashed after the Federal Reserve interest rate decision.
It slashed interest rates by 0.25%, bringing them to between 4.25% and 4.50%. The committee expects the bank to deliver more cuts in 2025, with the dot plot expecting two more cuts. Before that meeting, the dot plot estimated that it would slash rates four times.
The mildly hawkish Federal Reserve has led to a higher US dollar, with the DXY index rising from $100 earlier this year to $108. The greenback has gained against most developed countries’ currencies, such as the euro and sterling.
It has also gained against many emerging market currencies, some of which have crashed to a record low. Some of the top laggards are currencies like the Brazilian real, Turkish lira, and the Mexican peso.
USD/SGD technical analysis
USD/SGD chart by TradingView
The daily chart shows that the USD/SGD exchange rate has sharply recovered in the past few months. It has rebounded from the year-to-date low of 1.2783 to 1.2600.
Most importantly, the pair has moved to the 50% Fibonacci Retracement level at 1.3637. On December 11, the 200-day and 50-day moving averages flipped, forming a golden cross chart pattern.
The pair’s momentum indicators have continued rising, with the Relative Strength Index (RSI) and the MACD pointing upwards.
Therefore, the USD to Singapore dollar will likely continue rising, with the next point to watch being at 1.3760, the highest swing in October last year. More upside will be invalidated if the stock drops below the psychological point at 1.3400.
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