Martin Lee @ Sg
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Rally in USD as Investors Seek a Safe Haven

Barely two months after the USD had fallen to historical lows of 1.20 against the SGD, it has recovered and rallied more than 5% in the past two weeks to reach 1.27.

In just two weeks, the price has gone back to the rate we last seen six months ago (see USD/SGD weekly chart shown below).

In times of market turbulence, the USD has always been a safe haven asset, with investors moving funds from riskier assets to US treasuries.

And how often have we seen an overly-crowded trade with wide consensus views often proved to be wrong?

Just about everyone has been bearish on the USD, from the institutional investors to the man in the street. There were also many funds that launched SGD hedged class in the past couple of years, so as to hedge away the currency risk of the USD. In order to do so, they had to take a short position on the USD (versus the SGD).

So now we see some of them being caught out.

Overall, I still think the long term fundamentals of the USD is rather weak. However, do note that long term trends in the currency markets are always combined with plenty of short term counter-trends.

In the short term, we could see some resistance at the 1.284 and 1.30 levels if the USD/SGD rate continues to go up.

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Leave a Comment:

5 comments
Steve says 12 years ago

Martin

Post a chart showing the currency from 1990 – 2011 for SGD, UKP and USD.
I think people should be very concerned about the current strnegth of the Asian currencies. I feel a correction is on the way similar to 1997,

Reply
    Martin Lee says 12 years ago

    Hi steve, do you mean the two charts USD/SGD and GBP/SGD?

    Reply
Eugene Lim says 12 years ago

Does it have a possibility a huge amount of money flowing out of Singapore?

Reply
RedHill says 12 years ago

Interesting observation.

However, there is another aspect of the USDSGD relation which you did not mention. Just like the SNB of the Swiss, our MAS can play the devaluation game too! As silently as they want to play it, their foot print in the forex charts are clumsy and noticeable!

What evidence you ask that I have?!

I apologize. Nothing now. But in due time, this devaluation will surface as the chicken rice we eat will rise in price! Then that shall be the evidence! Sadly.

Humbly yours,
RedHill

Reply
    Martin Lee says 12 years ago

    Hi Redhill,

    The printing of money has always been a central theme. That is why we see prices of everything rising like nobody’s business. Inflation is the silent tax that governments of the world do not want you to know about. 🙁

    Reply
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