USD/SGD fell by 1% to 1.3940 after the surprise tightening announcement by The Monetary Authority of Singapore (MAS). Still, economists at TD Securities think it is an uphill task for SGD to strengthen against the USD and expect the pair to edge higher towards 1.41.

Another off-cycle move by the MAS

“The MAS recentred the midpoint of the SGD NEER (S$NEER) policy band up to its prevailing level but there was no change to the slope and width of the S$NEER band.”

“With core inflation not expected to return below its medium-term average of 2% this year and inflation risks leaning to the upside, we expect MAS to tighten monetary policy settings again at the upcoming October meeting.”

“Despite a stronger S$NEER, we think it is an uphill task for the SGD to strengthen against the USD and expect USD/SGD to revisit 1.41 amid broad USD strength in the near-term.”