USD/SGD holds near 1-week high on higher-for-longer US rate prospects

The USD/SGD currency pair held steady near one-week peak on Friday, as the greenback drew support from prospects the Federal Reserve would need to maintain interest rates elevated for longer after a stronger-than-anticipated US CPI print.

The headline annual CPI inflation remained steady at 3.7% in September, in contrast with market expectations of a slowdown to 3.6%. This was mostly due to a softer drop in energy costs offsetting easing inflationary pressures in other categories.

Energy prices decreased 0.5% YoY in September, after a 3.6% slump in August, mostly driven by a rebound in fuel costs.

In September, prices rose at a slower rate for food (3.7% vs. 4.3% in August), new vehicles (2.5% vs. 2.9% in August), apparel (2.3% vs. 3.1%), medical care commodities (4.2% vs. 4.5%), shelter (7.2% vs. 7.3%) and transportation services (9.1% vs. 10.3% in August).

Meanwhile, annual core CPI inflation, which excludes volatile food and energy prices, decelerated to 4.1% in September from 4.3% in August to mark its lowest level since September 2021. The core inflation print added to expectations that the Federal Reserve would probably not raise borrowing costs in November. But, overall, the CPI report raised the odds of monetary policy staying restrictive for some time.

“CPI data for September reveal further challenges with the ‘last mile’ in pushing inflation persistently back towards the (Fed’s) 2% target,” David Doyle, Macquarie head of economics, was quoted as saying by Reuters.

In other macro data, Singaporean GDP growth exceeded market consensus in the third quarter, preliminary figures showed. Singapore’s economy grew 0.7% year-on-year in Q3, following a 0.5% expansion in the second quarter. It has been the 11th consecutive quarter of positive economic growth and also the strongest one since Q4 2022.

Singapore’s services sector continued to expand in Q3, by 1.9% year-on-year, supported by sustained growth in wholesale & retail trade, transportation & storage, information & communications as well as accommodation, real estate and other services.

The city-state’s manufacturing industry contracted at a softer rate in Q3, by 5% YoY, as output in transport engineering rose.

As of 7:15 GMT on Friday USD/SGD was inching down 0.02% to trade at 1.3687. Yesterday the exotic Forex pair went up as high as 1.3708. The latter has been the pair’s strongest level since October 6th (1.3721).