FX Daily: AUD, THB and SGD near resistance levels


RBA might delay taper, BOT closer to rate cut
Philip Wee07 Sep 2021
    Photo credit: Unsplash Photo


    AUD is near the top of its 0.70-0.75 range.According to our model, AUD is likely to be capped around 0.7510 or two standard deviation from its mean trend value. The Reserve Bank of Australia might, at its meeting today, defer its decision to taper asset purchases to AUD4bn/mth from AUD5bn. The Australian economy is expected to contract in 3Q from the strict lockdowns to contain its most serious wave of infections. A double-dip recession is possible if 70% of the population are not fully inoculated by late October or early November, a condition for reopening the economy. 

     

    THB depreciated to 32.5 per USD after its two-week rally petered out at 32.2. The Bank of Thailand is another step closer to lowering its policy rate at its upcoming meeting on 29 September. At its last meeting on 4 August, two out of the six committee members voted to lower the target rate by 25 bps from 0.50%. The BOT also downgraded its 2021 GDP forecast to 0.7% from 1.8% previously. Yesterday, the Ministry of Commerce (MOC) was less confident about its 2021 inflation forecast of 0.7% to 1.7%. For the first time in five months, CPI inflation turned negative at -0.02% yoy in August from government subsidies in tuition fees, utility bills and selected food items. Having averaged 0.7% in the first eight months, MOC expects monthly inflation to stay negative for the rest of the year.

     

    SGD appreciation is limited to the floor of its pre-Covid range of 1.34-1.39 per USD.According to our model, the rise in the SGD NEER stalled around 0.7% above the mid-point of its policy band. Singapore might hold off returning the policy band to an appreciation path. The Ministry of Health warned that new daily Covid cases in Singapore could reach 2000 in October; cases doubled to more than 1200 cases last week. For now, the government is advising the public to reduce social interactions over the next fortnight and to step up regular testing. As a last resort, the government did not rule out returning to a heightened alert phase or imposing circuit breaker on a sharp increase in Covid cases ending up in intensive care units.







    Philip Wee

    FX Strategist - G3 & Asia
    philipwee@dbs.com
     

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