Singapore may have averted a technical recession in the third quarter, but foreign exchange strategists recommend staying short the local currency against the U.S. dollar, forecasting renewed weakness into 2016.
The Singapore dollar gained 0.9 percent against the greenback to $1.388 – its strongest since mid-2010 – on Wednesday after the city state's third quarter gross domestic product (GDP) growth beat estimates and the Monetary Authority of Singapore (MAS) refrained from easing monetary policy as aggressively as a section of the market had anticipated.
MAS, the country's de facto central bank which uses the currency rather than interest rates to guide the economy, said it would reduce the slope of its currency band, to "slightly" lessen the rate at which the Singapore dollar is allowed to appreciate.
Many had been expecting a bolder move including lowering the mid-point of the Singapore dollar's trading band to allow the currency to weaken.
"Today's move can be considered only a token easing…we see a chance of further easing," said Khoon Goh, senior FX strategist at ANZ.