Forex Investment and Currency Trading

Market is perplexed by the magnitude of the SGD appreciation of late, breaking below the key support level of 1.3800.  EUR/CNY and EUR/SGD are nearly identical in trade patterns and there is the thought that the MAS may be waiting to see what the PBOC does with its currency.  There were several rumors that the PBOC was going to be forced to reval its currency lower again to help combat the increased inflationary pressure that the country is seeing…not from the US but from Europe.  The EUR has literally screamed higher against CNY at the same time that Euro-area export growth is also increasing substantially. 

Although EUR, GBP and JPY were the key currencies in the SGD basket, the below chart is hard to ignore.  The PBOC continues to appreciate the chinese yuan against the dollar aggressively each day as we are now down to 7.0970 and it is believed that the pace of appreciation will only continue.  With JPY trading at below 100, EUR at 1.56 and CNY lower each day (over 11.5% appreciation priced in for the 1yr now), SGD will most likely continue its pace of appreciation as well, supported by its enormous Current Account surplus.