Singapore Dollar Strengthens on Fed Rate Cut Expectations

Singapore Dollar Strengthens on Fed Rate Cut Expectations

The Singapore dollar rose against the U.S. dollar on Thursday, supported by growing expectations that the Federal Reserve may soon begin cutting interest rates. This shift in sentiment follows weaker-than-expected U.S. economic data, which has reduced the appeal of U.S. fixed income assets.

Michael Wan, a senior currency analyst at MUFG Bank, noted in a report that softer U.S. retail sales and producer price index (PPI) data overnight have led to increased market pricing for Fed rate cuts. As a result, U.S. Treasury yields declined, with the 2-year yield falling by 2 basis points to 3.9415% and the 10-year yield down 3 basis points at 4.4212%, according to FactSet.

Lower yields make U.S. assets less attractive to investors, thereby weakening the U.S. dollar. In turn, the Singapore dollar has benefited, with the USD/SGD currency pair down 0.2% to 1.2952.

Analysts suggest that if U.S. economic indicators continue to show signs of slowing, expectations of monetary easing from the Fed may increase further, potentially fueling additional strength in regional currencies such as the Singapore dollar.