SINGAPORE — The Singapore dollar on Tuesday (March 21) scaled to its highest level in more than four months against the greenback and came within striking distance of its all-time high against the Malaysian ringgit reached last week, after overnight remarks by Chicago Federal Reserve president Charles Evans reinforced the perception that the United States central bank will not accelerate the pace of interest rate hikes.
The Singapore dollar reached an intraday high of S$1.3961 to the US dollar, extending the overnight rally in New York, before giving up gains on profit taking to end the Asian session little changed at S$1.3985.
The last time the US dollar was below the S$1.40 mark was on Nov 9 last year.
Against the Malaysian ringgit, the Singapore dollar climbed to 3.1706, just shy of the 3.1738 record high touched last Wednesday, before ending the Asian session flat at 3.1657, showed Bloomberg data.
The Fed lifted its key interest rate target last Wednesday to between 0.75 and 1 per cent, and said that its future course of hikes would be “gradual”.
With the Fed’s rate projections showing it was sticking to its outlook for a total of three rate hikes this year, rather than increasing the projection to four hikes, the US dollar has been on the defensive.
Mr Evans, a voter on the policy-setting Federal Open Market Committee (FOMC), on Monday repeated the central bank’s call for two more interest rate increases this year, disappointing US dollar bulls who had hoped for a faster pace of hikes.
He did say, however, that an additional hike was possible if inflation were to pick up.
Mr Brad Bechtel, managing director at US financial services firm Jefferies, said: “It is follow-through and a hangover from last week — the concept of a dovish Fed. Even though they hiked rates, the perception was that they were mildly dovish. We are seeing continuing US dollar sluggishness on the back of that.”
Mr Mitsuo Imaizumi, chief foreign exchange strategist at Daiwa Securities, said: “The US dollar is feeling pressure from lower US Treasury yields. There will be a lot of stop-loss selling if the dollar breaks under ¥112.”
The yield on benchmark 10-year notes stood at 2.464 per cent in Asian trading on Tuesday, down from its US close on Monday of 2.472 per cent. Late in Asia, the US dollar was flat at ¥112.70 but 0.5 per cent weaker versus the euro at US$1.0791.
Meanwhile, Minneapolis Federal Reserve president Neel Kashkari, who cast the sole dissenting vote when the FOMC raised the key rate, reiterated his stance that there was no need to rush the rate hikes.
“We do not have a high inflation threat right around the corner. I would be very surprised if core inflation reaches 2 per cent this year,” he said on Monday, adding that the lack of price pressure affords the Fed patience in raising rates.
The markets are also braced for a packed week of Fed messaging, with no less than nine different policymakers set to speak, including chair Janet Yellen tomorrow. AGENCIES