US Fed pivot will lift Singdollar, other Asian currencies in 2024
The Straits Times|December 16, 2023
Local currency could reach $1.30 against greenback, but its Asian peers are poised to make even stronger gains
Ovais Subhani
US Fed pivot will lift Singdollar, other Asian currencies in 2024

The Singapore dollar and most Asian currencies are set to ride into 2024 on an optimistic note, after the United States central bank, in a surprise move, signalled that it is considering lowering the interest rates that elevated the US dollar in recent years.

The local currency now has the potential to reach $1.30 per US dollar, compared with around $1.34 per US dollar before the Federal Reserve's meeting on Dec 13.

Asian currencies such as the South Korean won and Taiwan dollar are poised to make even stronger gains, as these usually benefit more from favourable turns in global monetary policies and industry cycles like an upturn in electronics exports, analysts said on Dec 15.

The Fed has not changed its key rates since June. Until last week, most economists believed it would maintain a restrictive monetary policy for a much longer period to pull core inflation down to its target of 2 per cent. US core inflation is now 3.5 per cent.

Following its recent monetary policy meeting, markets are now pricing in a less restrictive monetary policy stance by the Fed.

This saw the US dollar easing the most in months against a basket of major currencies such as the euro, Japanese yen and British pound. In December, the US dollar lost around 1.5 per cent of its value against other currencies.

Asian currencies gained the most from the greenback's sell-off, with the Singdollar rising to its highest level since July and taking this week's gains to a total of 1.2 per cent.

The local currency's gains fall short of its Asian counterparts though. The Korean won is set for gains of nearly 2 per cent versus the US dollar this week, while the Japanese yen could strengthen by about 3 per cent. The Thai baht is headed for a 2.4 per cent jump in the same period.

Analysts said the Singdollar could continue to underperform against most of its Asian peers due to easing inflation amid rebounding economic expansion.

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