Singapore Dollar: Range risks against US Dollar after MAS hold – OCBC

Christopher Wong at OCBC Bank highlights that Monetary Authority of Singapore (MAS) kept its appreciating S$NEER policy stance unchanged after two prior tightening rounds, with output gaps and inflation forecasts suggesting less urgency for further moves. USD/SGD has been driven mainly by broader US Dollar strength and US yields, and Wong expects the pair to stay sensitive to external data, with MAS policy still offering underlying support for the Singapore Dollar.

MAS stance and USD drive USDSGD

"SGD weakened on Wednesday, though much of the move was driven by broad USD strength following stronger-than-expected US CPI rather than MAS’s decision to keep policy unchanged."

"MAS kept policy on hold after tightening twice in April and July. The accompanying statement pointed to a narrowing positive output gap through 2027, while the 2026 core inflation forecast range was narrowed to 1.5–2.0%. While inflation risks remain tilted to the upside, MAS appears to see less urgency for further tightening, with the cumulative effects of earlier policy adjustments and the existing appreciating S$NEER path providing sufficient monetary restraint for now."

"Importantly, a policy hold does not amount to easing, as the appreciating S$NEER stance remains intact. The on-hold decision saw a 20bp decline in our S$NEER to around 1.65% above the model-implied policy midpoint, from 1.85% before the announcement. We expect this deviation to hold largely steady after the adjustment."

"We expect USD/SGD to remain sensitive to broader USD sentiment in the interim. A sustained rise in USD could keep the pair supported, although MAS’s existing appreciating policy stance should continue to provide some underlying support for SGD."

"If the spike fails to build on momentum, then the pair may well revert back to consolidation in previous range of 1.2760 – 1.2840. But if price action is sustained, then bullish pressure may gather further momentum, and the pair may well see 1.28 – 1.29 range take hold."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)