USD/SGD falls to 118-month low on bets of out-sized Fed cut

The USD/SGD currency pair plunged to 1.2932, a level not seen since mid-November 2014, on Tuesday, as market players increased wagers on an imminent super-sized interest rate cut by the Federal Reserve this week.

Meanwhile, data showed Singapore’s non-oil domestic exports had surged in August, but at a slower rate than expected.

Markets are now pricing in about a 67% chance of a 50 basis point Fed rate cut at the Fed’s September 17th-18th policy meeting, compared to a 30% chance a week ago.

Futures markets continued to price in 125 basis points of Fed rate cuts by the end of this year.

“Regardless of which of -25bps or -50bps the (Fed) goes with on Wednesday, we do think that the Fed’s messaging will be ‘dovish,’” Macquarie strategists wrote in an investor note.

Additional focus will be on the upcoming US retail sales for August, a key consumer spending-related indicator.

In other data, a report by Statistics Singapore showed the country’s non-oil domestic exports had risen 10.7% YoY in August, slowing from a 15.7% surge in July. The data fell short of market consensus of 15% growth.

Exports rose to Hong Kong (70.6% YoY), China (18.8% YoY), South Korea (20.3% YoY), Taiwan (37.2% YoY), Malaysia (28.6% YoY) and Indonesia (18.6% YoY).

As of 7:58 GMT on Tuesday the USD/SGD currency pair was edging down 0.11% to trade at 1.2935.