SINGAPORE - DBS analysts are expecting the euro to keep weakening against the Singapore dollar, according to a research note released by the bank on Thursday (Nov 14).
"Having broken its 1.52 support in September, EUR-SGD is looking to fall below the psychological support at 1.50," said the DBS strategists Philip Wee and Duncan Tan.
The euro was trading at 1.4988 Singdollars as of 2:40pm on Thursday, 0.2 per cent lower than its close on Wednesday of 1.5010. It has slid 1.2 per cent against the Singdollar in the past month, and 3.9 per cent so far this year.
On the reasons for their view, they noted that unlike Singapore, Germany is not expected to avert a technical recession.
"Consensus expects Germany's GDP (gross domestic product) growth to come in at minus 0.1 per cent quarter on quarter based on the Saar (seasonally adjusted annual rate) in Q3, the same negative reading as the previous quarter."
Conversely, the Singapore economy grew 0.6 per cent in the third quarter from the previous three months, compared with the 2.7 per cent quarter-on-quarter contraction in the second quarter.
In addition, they noted that monetary policy easing in Singapore has been milder than in the euro zone.
"The SGD policy band is still on an appreciation path despite the slight flattening in its slope last month," they said.
Meanwhile, the European Central Bank (ECB) has not only pushed its deposit facility rate deeper into negative territory in September, but also restarted its asset purchases programme this month.
"The attractiveness of the SGD over the EUR is best reflected by a positive 10-year SGS (Singapore government securities) yield just below the ECB's 2 per cent inflation target, versus its negative yielding European Union counterpart," said Mr Wee and Mr Tan.