Singapore dollar sits at $1.2498

The local currency has failed to find any uplift from the improved sentiment in global markets, says IG Markets Singapore.

IG Markets Singapore said:

The Singapore Dollar is using the $1.25 mark as a ceiling against the greenback as it manages to hold steady.

The local currency has failed to find any uplift from the improved sentiment in global markets, which normally triggers a weakening US dollar.

Instead the Singapore Dollar has been slowly edging lower against the greenback and sits at $1.2498 this morning.

While European and Wall Street trading felt a breeze of optimism last night there are still lingering doubts about the Chinese economy.

Although PBOC policy easing is on the cards, there is a feeling that China may still face tough economic conditions which may drag down surrounding economies and their currencies.

BK Asset Management meanwhile noted (for 16 August 2012 trading):

The euro traded higher against the U.S. dollar but unlike other major currency pairs such as USD/JPY and GBP/USD, today's move did not take the EUR/USD to a fresh monthly high. Instead, the currency pair remains trapped within its 1.5 week trading range of 1.2240 and 1.2440.

Reassuring comments from German Chancellor Merkel lent support to the euro. In a speech made during her trip to Canada, Merkel reiterated her pledge to "do everything we can in order to maintain the common currency."

In other words, the Germans will fight tooth and nail to defend the euro but hopefully it won't come to that. While the EUR/USD remains very weak, the recent stabilization in the currency is a big relief to policymakers. The fact that 10 year Spanish bond yields also dropped to its lowest level in more than 2 months today is music to their ears.

Consumer prices were the only piece of Eurozone economic data released today and EUR/USD traders were completely unfazed by the sharp decline in inflationary pressures. CPI fell 0.5 percent in July, marking the third consecutive month of lower prices.

Accelerated budget cuts and increasing job losses in the region forced retailers to cut prices to attract demand. The ECB won't be too worried however because on an annualized basis, CPI rose from 1.6% to 1.7%.

Overall, muted inflationary pressures in Eurozone leaves room for further easing from the ECB, if needed. German producer prices and Eurozone trade numbers are scheduled for release on Friday.

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