“I agree with David’s analysis of the USD yesterday. I flipped through some currencies and looking at a very long term chart of the Singapore Dollar (per USD) one can clearly see a likely bottoming formation following the low in 2011. The price has recently broken above 2014 and 2013 highs looking for next resistance levels of the 2012 and 2013 highs. I know little about the fundamentals of Singapore and am curious to hear your view. I also looked at the Straits Times Index and despite ranging over the last year, it seems that major lows are rising and may support an eventual break above the 2013 high. I also find the chart pattern of the Vietnamese and Indonesian indices interesting.“ 

Eoin Treacy's view

Thank you for re-highlighting the Singapore Dollar which as you say has top formation characteristics versus the US Dollar. (Also see Comment of the Day on November 4th). Singapore has a made great strides in becoming the private banking destination of choice for Asia which has bolstered the allure of the Singapore Dollar as a store of value.

This saw the currency rally by 50% against the Dollar between 2001 and 2011. Over the same period, property prices escalated, immigration surged and the cost of living increased. These all represent medium challenges for the city state as property prices retreat from their peaks. This article from the Strait Times highlights the 10% drop in the luxury property sector of the market this year. 

The potential for additional currency weakness may act to stimulate interest in the stock market from a local currency perspective but the returns are likely to be more volatile from the perspective of a foreign investor. 

As I pointed out on Tuesday, the Singapore Dollar is not the only Asian currency to be under pressure both from the US Dollar’s strength and the Yen’s weakness. The Korean Won, Thai Baht, Malaysian Ringgit, Vietnamese Dong and Indonesian Rupiah are all also susceptible to additional selling pressure. 



In local currency terms, the Singapore, Indonesian and Vietnamese indices are trading in the region of their respective 200-day MAs. The recent lows will need to hold if medium-term potential for additional upside is to be given the benefit of the doubt.