Most analysts (14 out of 15 analysts in Bloomberg’s survey) expected no change in policy settings. However, the MAS surprised the market by raising the slope of the SGD NEER policy band. The SGD rallied on today’s MAS action and economists at TD Securities see further upside given that MAS is likely to continue tightening policy again in April 2022.
“MAS slightly raised the slope of the SGD NEER band, surprising us and the market. We expect the slope to be raised to +0.5% from 0% previously. There was no change to the midpoint and width of the SGD NEER band.”
“Despite Q3 GDP coming in below consensus and covid concerns remaining unresolved, the buildup in external and domestic cost pressures outweighed immediate growth concerns. The next step could be a re-centering of the midpoint at the April 2022 meeting.”
“Given the risk of a more aggressive tightening at the April 2022 meeting, we see more room for SGD upside and remain constructive on SGD.”
“The path of least resistance favours a lower USD/SGD, and we expect USD/SGD to trade to 1.34 (around the 23.6% Fib level and 200-DMA) by year-end.”