The US fiscal cliff is capping any bigger moves.
IG Markets Singapore said:
The local currency has managed to remain below $1.225 against the greenback as traders taking on a more optimistic mood as of late.
Hopes are high that a Greek debt agreement will be reached later today which has seen risk assets rise in anticipation. This saw the USD weaken on Friday night.
This morning it trades at $1.2223 against the local currency.
The Singapore dollar has sat in a very tight channel this month with the US fiscal cliff capping any bigger moves.
This is likely to be remain the case as we head towards the year end. Industrial output PMI for Singapore is due out this lunchtime which may have some affect of risk sentiment.
DBS Group Research meanwhile noted:
Risk appetite is likely to be supported after last week’s strong recovery in US equities. Both the Dow and S&P500 are now above the psychological 13,000 and 1,400 levels respectively.
France’s rating downgrade and uncertainties over a debt deal for Greece to appreciate failed to bring EUR/USD below 1.28; the currency pair has moved closer towards 1.30 since. Hence, don’t expect EU Summit, which failed to agree on a budget deal over the weekend, to hold the euro back either.
To a large extent, support for euro also came from renewed interest in yen carry trades. This play was spurred by expectations that the general elections in Japan on December 16 would usher in a new government bent on pushing weak yen policies to revive the economy.
Apart from urging the Bank of Japan to pursue “unlimited” monetary policy, opposition leader Shinzo Abe is now pushing for big government spending too. Nonetheless, USD/JPY is converging on a major technical resistance around 83.15, where a major trendline resistance is located.
Risk appetite is also encouraged by signs of US lawmakers wishing to avoid a repeat of the political brinksmanship that led the US to lose one of its triple-A debt rating in August 2011. For now, both the White House and the Republicans have been keeping up the perception of a compromise as opposed to a deadlock in the fiscal talks.
Until then, Friday’s jobs data will be the one to watch on the impact of Hurricane Sandy. A disappointing outcome may not hurt much as it gives the Fed more reason to continue bond purchases into 2013.
In Asia, China’s manufacturing PMI out on December 1 will be important in supporting the global recovery story. Another reading above 50 in November, preferably stronger than the 50.2 seen in October, will give traction to the view that China’s real GDP growth has turned the corner.
This coupled with the weakness in both the US dollar and the Japanese should, in turn, keep up appreciation pressures in the Chinese yuan and other surplus-led emerging Asian currencies.
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