A$ and yen still safe, but £, NZ$ and ringgit look more vulnerable
WALL Street and the US dollar have continued to look edgy after yet another month of horrible US job losses in March, sharing the financial headlines of the past fortnight with an increasingly feeble British pound and the de facto appreciation of the Singapore dollar last week.
In currency trading yesterday, the greenback was trying to keep its nose above last week's record low of S$1.3546, while the British unit was less than half a Singapore cent above Monday's fresh five-year low of S$2.6654.Locally, the Monetary Authority of Singapore (MAS) surprised quite a few last Thursday by re-centring the mid-point of its undisclosed trading band for the trade-weighted Singapore dollar or S$ nominal effective exchange rate (S$Neer) higher - while keeping the upward slope and width of that band unchanged.
Effectively, Sing-watchers estimate that this translated into an appreciation of about 2 to 2.5 per cent for the S$Neer. Accordingly, the forecast range for the US dollar by end-2008 has now been lowered to S$1.30-S$1.35 - compared with a higher S$1.33-S$1.38 range before the MAS decision.
Further afield, the British pound tumbled after more bad news from the UK housing market and a 0.25 per cent interest rate cut, crashing through our first key support area of S$2.7150 to S$2.72 like a hot knife through butter.
And by yesterday afternoon, the euro had soared to a fresh post-launch high of 80.64 pence - boosted by news that a headline number for the key UK RICS housing market survey last month had tumbled 13 points to register a -78.5 low (the worst reading in its 30-year history). In sharp contrast, the seven Chinese yuan support for the soggy greenback came (and went) with hardly a pause.
North of the Causeway, however, the Singapore dollar's latest surge had pressed the Malaysian ringgit down to a fresh 16-month low of S$0.4278 by yesterday afternoon, while record oil prices found the Indonesian rupiah a fresh 20-month low of S$0.01473 per 100 rupiah.
All told, currency action has continued to be heavily influenced by Wall Street gyrations, but with two significant differences. Yes, the euro - a safe-refuge favourite - clocked a fresh high of US$1.5912 when Wall Street slid again late last week.
But for a change, it was the Singapore dollar that shared top spot with the Australian dollar in terms of percentage gains - the latter thanks to still-soaring prices for both soft and hard commodities. And, with Wall Street's key indices managing (somehow) to emerge from the past two weeks relatively unscathed, the Antipodean pair have also recorded decent yen gains. Technically, however, the picture for the New Zealand dollar looks far less healthy than that of its neighbour, at least in Singapore dollar terms.
In terms of more familiar US dollar supports, two of the six we highlighted here on April 2 have come and gone (seven yuan and 40 rupees), two are in sight (S$1.35 and NT$30), but the two non-Asian ones have still to be tested (US$1.6 per euro and 70 on a broader indexed basis).
And in Singapore dollar terms, the chart picture still looks decent for the Australian dollar and yen, which have managed to stay on the right side of S$1.25 and S$1.32 per 100 yen respectively.
However, we must caution that the latest bout of Sing dollar strength hasn't been good for some others. The New Zealand dollar, for example, has been forced below a six-month old trading range of roughly S$1.08-S$1.14. Further losses threaten if it cannot find its way back into that range quite quickly.
For the pound, there is an interim support area at around S$2.63, but what scares us is that more substantial support only kicks in much lower down, at somewhere between S$2.48 and S$2.52.
The technical picture for the Malaysian ringgit could also turn a lot nastier versus the local unit, if it cannot keep its head clear of fairly important support which looms quite close at around 42.5 Singapore cents.
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