Sing dlr at 14-yr high vs ringgit, Asia FX mixed

SINGAPORE: The Singapore dollar hit a 14-year high against the
ringgit on Wednesday as offshore funds continued to seek relatively
safer assets and on views that Malaysia may allow a weaker currency to
spur growth amid global economic slowdown. The city-state's currency
rose 0.7 percent against the neighboring unit to 2.5170, the highest
since July 1998, as real money accounts and hedge funds bought it. That
came even though yields on Malaysian government bonds stayed much
higher than Singapore bonds. Spread between 10-year Malaysian bonds and
10-year Singapore bonds has widened 15 basis points (BPS) so far this
month.
"Investors really like Singapore assets due to safety,
the stable Singapore dollar and low rates," said BNP Paribas currency
strategist Thio Chin Loo in Singapore.
She said the Singapore dollar may head to 2.55 per the ringgit.
Singapore
is the only country in emerging Asia with a credit rating of AAA and
its currency has been the second best-performing regional unit after
the Philippine peso with a 2.5 percent gain versus the US dollar.
Saktiandi Supaat, head of FX research at Maybank in Singapore, said the Singapore dollar is expected to remain firm against the ringgit this year.
"The
ringgit may see more volatility and its weakness may be more pronounced
compared to the past, while the Singapore dollar is locked in a band.
Inflation differentials may potentially lead to some speed of change in
policy responses too," Supaat said.
He expects the Singapore
dollar to stay around 2.51 versus the ringgit by the end of the year,
although it may head to 2.55 bbefore that.
Singapore's annual consumer inflation in May stood at 5.0 percent, almost triple of Malaysia's 1.7 percent.
That may allow Malaysian policymakers to endure a weaker ringgit to boost exports, dealers and analysts said.
But
Maybank's Supaat said it may be difficult for the Singapore dollar to
extend gains versus the ringgit from the current level much further in
the longer term, adding the city-state's currency on Wednesday was
boosted by a higher Australian dollar.
"Inherently there is the
risk of capital inflows into Singapore bonds and property markets etc.
for safe haven reasons and also for expected appreciation. This may
feed into asset price inflation. At worst, these are hot money inflows,
there is always a risk of sudden outflows," said Supaat.
He said the Singapore dollar will retreat back to 2.40 versus the ringgit by the end of 2013.
Singapore state investment firm Temasek Holdings
is in talks to buy a stake in a 4 billion Malaysian ringgit ($1.26
billion) project in Malaysia's southern state of Johor, the Business
Times reported earlier. That may boost demand for ringgit.
Meanwhile,
most emerging Asian currencies were mixed amid worries about the impact
of a global slowdown on corporate earnings, while investors were not
convinced the euro zone can bring down the borrowing costs of its
debt-ridden members.
Investors are keeping an eye on the result of a German court hearing on the euro zone bailout fund. PHILIPPINE PESO
The
Philippine peso dipped against the dollar when the country's economic
planning chief said it should monitor more closely the impact of a
stronger peso on exports.
"We need to ensure we are not eroding
further the competitiveness of our exports, that would mean more
serious unemployment problems," said Arsenio Balisacan, economic
planning secretary.
But the peso's downside was limited with investors lined up to buy around 42.00 on dips, dealers said.
Model
funds and speculators appeared to still hold long positions in the
peso, they added. WON The South Korean won earlier slid on dollar
demand from local importers and stock-linked outflows. But bond inflows
and exporters' bids for settlements helped the currency rebound. -
Reuters