western union business solutions currency outlook outlook of sgd... · 2015-01-14 · currency...

Western Union Business SolutionsCurrency Outlook

January 2015

business.westernunion.com.au

What’s coming up

© 2015 Western Union Holdings, Inc.All Rights Reserved. Western Union Confidential 2

• Steven Dooley – Currency Strategist APAC

History in the making!


• These are historic times

• US interest rates are one of the most important measures in the world. We have never had a period in which the key global rate has been steady for seven years – and certainly not at zero.

• The US’s ZIRP has caused massive moves: gold to almost $2000, US equities to all time highs, property markets to record levels

• How will the world cope with the end of easy money? (Hint: Very badly. It always has before.)

SGD: Shifting Sands


• The Singapore dollar has been one of the best performing currencies over the last 30 years. Only JPY and CHF have done better

• And why not? Singapore growth story has been magnificent

• The Singapore dollar has always been unique because the Singapore government manages monetary policy via the exchange rate (rather than interest rates)

USDSGD since 1981

USD/SGD Exchange Rate; Source: Reuters

SGD recently


• The US dollar has been the best-performing currency in 2014 as markets look towards to the first US interest rate increase in eight years, sometime in 2015

• The Singapore dollar has also weakened after a series of poor Chinese numbers, including last week’s disappointing Chinese import numbers and poor industrial production results

USDSGD trades at four-year highs


What drives the SGD?


• Increasingly, global trade is the driver of the SGD.

• As global trade drives SGD, we can identify early signals in Singapore balance of payments

• Singapore dollar now acts partly as an Asian “safe haven” but also as an proxy for Chinese growth

What does the market say?


• Reuters FX Poll of 22 currency analysts has found that most expect the USDSGD to stay steady or rally over the next 12 months

• Market analysts still have a broad range of forecasts with a 10-cent range from low to top

• This is a sign of uncertainty

What’s next?


• Most analysts expect further USD gains as the Federal Reserve starts to raise interest rates.

• The market has started pricing in higher US rates towards

• Thus, a meaningful rally in USDSGD in late 2014 is widely expected

• The usual movement is 9%. If so, a move to 1.45 by the end of the year would not be unusual

• Technically, a break out of the consolidation pattern, above 1.2700. sets up a long-term move to 1.4000

Reuters Poll projects a higher USDSGD


USDSGD forecasts


30 Jun 15 31 Dec 15

1.3800 1.4400

1.3300 1.3300

WUBS Forecast

Crazy? Or an average year?



ASIA

China


Ongoing strength likely to continue

However, growth slowing

CNY is one of the globe’s quiet achievers

Hong Kong


Tied to USD, likely to appreciate

Will the peg be removed?

Japan


Is Japan is a 25-year recession?

Deflation can’t be stopped

Major pressure as BoJ prints money


EUROPE

Eurozone


Losing value as ECB prints money

ECB meetings crucial

Some analysts have EURUSD at 0.95 (20% fall)

UK


UK recovering well

Like the US, FIFO

Higher UK rates should support

Switzerland


Weighed down by Euro’s falls

Pushed higher versus Euro

SNB intervening in market


REGION

Malaysia


Likely to struggle as US rates climb

Region’s major oil exporter

Indonesia


US rates also hurt, but more vulnerable

Emerging markets most vulnerable

Australia


Industrial commodities meltdown

China slowdown?

RBA might cut rates

Housing the major risk

New Zealand


Heavy selling pauses, economy supported

Agricultural commodities haven’t been hit

RBNZ still considering raising rates

What can we do for you .. ???


What can we do for you .. ???

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western union business solutions currency outlook outlook of sgd... · 2015-01-14 · currency...

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