Short SGD vs. USD, EUR and MYR – RBC CM

According to the analysts at RBC Capital Markets, SGD is much more vulnerable to rising USD and US interest rates than it was in the last Fed tightening cycle and is one of the most exposed in AXJ to weak global demand.

Key Quotes

“Singapore’s economy has seen a large structural shift in its export orientation toward China and away from the US. Its household debt ratio is also the highest in the Asian region at 76%, most of which is in the form of variable interest rate housing loans. Singapore’s household debt-to-income ratio had the largest percentage point increase in the world between 2007 and 2014 of 29%pts to 230%. High debt ratios leave the Singapore economy vulnerable to higher interest rates.”

“Within AXJ, Singapore is particularly exposed to weak global demand since it does not have the buffer of strong domestic demand; private consumption of 36.8% of GDP is the lowest in the region. Short SGD against a basket of EUR, MYR, and USD serves as a good proxy to the S$NEER, protects against directional USD moves, and offers positive carry.”