Singapore dollar bulls are gathering in the swap market

SINGAPORE (March 27): Singapore’s interest-rate markets are signaling gains for the local dollar as bets grow the nation’s central bank will avoid easing policy next month and some economists are starting to forecast tightening in October.

The city-state’s two-year swap has fallen below its US counterpart this year, sending the gap to minus 9.6 basis points on March 20, the lowest level since June 2012. Because the nation’s central bank uses the exchange rate as its policy tool, rather than interest rates, the negative spread indicates expectations the Singapore dollar will strengthen to compensate for lower domestic rates.

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