Singapore dollar sits at $1.2212

The local currency was unchanged as FX traders decided not to take on more bets.

IG Markets Singapore said:

The Singapore dollar sits unchanged against the greenback as FX traders decided not to take on more bets last night.

Trading was muted by hurricane Sandy causing Wall Street to close yesterday while activity is expected to be low ahead of the US presidential elections.

Traders are still worried about the fiscal cliff in the US and who is best to tackle these budget cuts and tax rises when they kick in next year.

The local currency has spent October trading in a very tight range against the USD and is currently sitting at $1.2212.

Traders spot nothing on the horizon that is likely to move the pair in the short-term as caution remains the watchword.

DBS Group Research meanwhile noted:

Superstorm Hurricane Sandy is expected to keep markets on the defensive. Like yesterday, stock exchanges in New York are expected to stay closed today. Futures currently indicate that the Dow Jones Industrial Average will trade below 13,000 when the exchanges re-open tomorrow.

This has not happened since the September 11th attacks in 2001. Back then, the US dollar was initially supported. The rally was, however, the last stretch of the strong US dollar policy that started in 1995, a prelude to a multi-year downtrend for the greenback. That was a pivotal point when the US budget surplus reversed into a deficit, returning the US into a twin deficit position.

Conversely, businesses today are worried that the US fiscal cliff may tip the US economy towards recession. Sandy may change this. As witnessed in other crisis-hit countries in Japan, Australia and New Zealand, fiscal consolidation plans will probably be postponed. The US may yet run a fifth year of budget deficit in excess of USD1 trillion. No one is going to complain about QE infinity and the Fed’s pledge to keep rates low into mid-2015.

Against this background, the US Treasury is likely to push emerging countries at this weekend’s G20 Summit to contribute more towards promoting global growth and economic stability. And this is likely to imply accepting more currency appreciation, especially for China and other emerging Asian countries.

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