Singapore dollar to act as Asian haven in 2012, says HSBC

The Singapore dollar could be an Asian safe-haven currency despite the city state’s vulnerability to external volatility, says Ronald Ip, director at wealth solutions group, Asia Pacific, global markets at HSBC.

Given the country’s relatively stable political environment and the ongoing infrastructure development, the director is positive on Singapore dollar next year, estimating a 10% currency appreciation. He says the country’s inflationary pressure is likely to persist which may induce the government to use monetary tools to ease it, leading Singapore dollar to rise further next year. Official data found Singapore’s inflation rate was at 5.5% in September, staying above 5% for the fourth straight month.

Meanwhile, Ip is positive on the Chinese yuan and Australian dollar, saying they will be supported by their healthy fundamentals especially China, as it is likely to achieve high economic growth of 9% this year, given the strong rise of the country’s retail sales which could offset the drop in growth of exports.

However, he warns there maybe a downside risk for Asian currencies as they have already gone up a lot this year, citing the recent sell-off in September as investors remain cautious that European debt issues will hurt the entire economy.

When it comes to next year, he expects the global FX market will continue to be driven by investors’ risk appetite, predicting some other major currencies, such as Euro and the dollar, will continue to volatile on the back of the ongoing Europe crisis and the sluggish growth of the US economy.

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