US dollar continues to weaken against Singdollar

Analysts say the slide began when the US Federal Reserve last week flagged more gradual than expected interest rate rises.
Analysts say the slide began when the US Federal Reserve last week flagged more gradual than expected interest rate rises.PHOTO: REUTERS

The United States dollar has weakened further against various currencies, including the Singapore dollar - with further softening expected.

Analysts say the slide began when the US Federal Reserve last week flagged more gradual than expected interest rate rises. A lack of detailed economic plans from President Donald Trump is seen as another factor.

The greenback slid 0.3 per cent to $1.3963 from Monday's close of $1.3967 - the first time the Singdollar had cracked the 1.40 floor against the greenback since Feb 28.

Economists said the US dollar's weakness against the Singdollar is likely to persist in the short term.

"We expect more downside for the US dollar-Singdollar pair in the next couple of weeks, with the support level likely around $1.38," said United Overseas Bank economist Francis Tan. But UOB was keeping its year-end forecast at $1.46 based on a recovering US economy.

The US dollar hit a six-week low on Monday, extending the down trend from last week, on concerns over a dovish Fed. The Fed announced a quarter percentage point increase in US interest rates last Wednesday but flagged gradual rate hikes ahead - running counter to market expectation of a swifter pace of tightening .

The dollar index, which tracks the US dollar against a basket of currencies, has slipped under 100 for the first time since Feb 7, falling over 0.5 per cent to about 99.8 yesterday.

CIMB Private Bank economist Song Seng Wun said: "There is the anticipation that the BOE (Bank of England) and the ECB (European Central Bank) may be done with the easier monetary policy and that the next turn is up, rather than down. If the US continues with a more gradual approach, then traders could take some of the money off the table from the dollar side."

The absence of a detailed US economic and fiscal policy did not help, Mr Song added. He is similarly keeping his US dollar-Singdollar forecast unchanged at $1.45 at the year end.

Economists do not expect the Singdollar to break below the $1.38 mark to the greenback any time soon, barring a surge in the Republic's economic growth and core inflation.

A version of this article appeared in the print edition of The Straits Times on March 22, 2017, with the headline 'US dollar continues to weaken against Singdollar'. Print Edition | Subscribe