[B]Talking points
• USDSGD Runs Into Resistance At 1.3853
• Singapore King Yet to Approve MPC
• Cathay Pacific Effects Linger[/B]
[B]Talking points
• USDSGD Runs Into Resistance At 1.3853
• Singapore King Yet to Approve MPC
• Cathay Pacific Effects Linger[/B]
Singapore and Hong Kong Dollars Firm, As Pairs Run Into Resistance.
The Singapore dollar firmed through the Asian trading session after the USD/SGD ran into resistance at 1.3853. The pair has appreciated over 400 bps on the week as broad based dollar strength continues, despite a less than Hawkish Fed. The recent move higher in the USDJPY has helped the dollar move higher against the Asian crosses, but with significant resistance at 110, we could see profit taking and stronger support for Asian currencies. The new monetary policy board has yet to be approved by the King of Singapore, leaving the chore of tackling inflation with his highness. The conflict between the Bank of Thailand and his majesty has escalated as the new board is filled with government officials, who are reluctant to raise rates. The King has not granted approval for the new chairman of the board, which is critical as an August 27 rate decision looms. The MPC may not be able to meet in time leaving policy in the balance and inflation unattended.
The USDHKD continued to advance as U.S. equity markets continues to gain following the Fed rate decision. The pair cleared resistance at 7.8050 reaching as high as 7.8065, were resistance would send it lower. After falling to 7.8042 bullish dollar sentiment would send it back above resistance where it continues to trade in a tight range. Hong Kong equities were also lower on the day, weighed down by the fallout from Cathay Pacific’s weak earnings report.
Upcoming initial jobless claims and pending home sales release due in the U.S. may provide event risk for the emerging market currencies. Another week of over 400,000 unemployment filings could inspire risk aversion and see the carry trade unwind giving support to safer havens like the Hong Kong Dollar. The housing market in the U.S. has been its main albatross and with another negative reading due it will highlight that the effects of the subprime crisis are still lingering, especially after the disappointing earnings from Freddie Mac and AiG.
For more emerging market news read the Daily Fundamental report.
