The Singapore dollar was slightly higher late Wednesday despite the US central bank chief’s broader pessimism about the US economy as investors continued to focus on the prospect of a third round of quantitative easing.
However, some analysts now expect the possibility of QE3 to be less appealing for market participants as investors begin to shift their attention to the more troubling conditions that would herald the introduction of looser monetary policy.
“If the market starts to focus more on deflation then I think you will see the US dollar start to find some support,” DBS currency economist Philip Wee said.
OCBC expects the greenback to continue to trade with a heavier bias against the Singapore dollar, and tipped a 1.2550 to 1.2650 Singapore dollar range heading into the offshore trading session.
Investor focus is likely to be on the second part of US Federal Reserve Chair Ben Bernanke’s testimony to congress later Wednesday.
Singapore government bond yields were up slightly at the longer end as investors awaited more guidance from the Fed chair.