Singdollar drops further against surging US$

A packet of former US President Abraham Lincoln five-dollar bill currency is inspected at the Bureau of Engraving and Printing in Washington, on March 26, 2015.
A packet of former US President Abraham Lincoln five-dollar bill currency is inspected at the Bureau of Engraving and Printing in Washington, on March 26, 2015. PHOTO: REUTERS

The Singdollar has weakened further against the surging greenback in the wake of comments from United States Federal Reserve chairman Janet Yellen that an interest rate rise could come "relatively soon".

One US dollar could buy about S$1.43 yesterday, up from S$1.42 on Thursday and S$1.39 on Nov 8 before the US presidential election. This is the weakest the Singdollar has been against the greenback since February.

Meanwhile, the three-month Sibor or Singapore interbank offered rate - which is used to price home loans - has spiked to 0.9161 per cent. This is up 5 per cent from Nov 11, and the highest since July.

The Sibor is typically highly correlated with US interest rates.

Dr Yellen said on Thursday that recent data points to a stronger labour market and more robust economic outlook in the US, indicating that the world's biggest economy is likely strong enough to withstand an interest rate rise soon.

She added that the outcome of the US presidential election had not changed the central bank's assessment that the case for a rate increase had grown.

Investors were already widely expecting US interest rates to go up this year, and Dr Yellen's comments bolstered expectations that the Fed will move at its next meeting on Dec 13 to 14.

Higher interest rates are seen as positive for the US dollar. This is because higher rates prompt investors to move more money into US dollar-denominated assets, thereby bumping up demand for the greenback.

The US dollar has already strengthened significantly against Asian currencies in the wake of the presidential election, buoyed by expectations that President-elect Donald Trump will ramp up government spending.

Credit Suisse senior investment strategist Heng Koon How said the greenback will remain relatively strong against the Singdollar, especially on the back of Singapore's slowing economic growth and lacklustre export outlook.

The greenback is expected to approach S$1.45 in the first quarter of next year, he added.

"A December rate hike is imminent and (the Fed) is likely to hike twice across 2017 as well," said Mr Heng.

With interest rates inching up, home owners looking to refinance their mortgages should weigh the costs of refinancing - such as conveyancing fees - against potential savings from the interest rate differential, said Mr Rohith Murthy, co-founder and managing director of SingSaver.com.sg.

Repricing, rather than refinancing, into a lower rate loan might be more cost-effective, he added.

A version of this article appeared in the print edition of The Straits Times on November 19, 2016, with the headline 'Singdollar drops further against surging US$'. Print Edition | Subscribe