Western Union Business Solutions Currency Outlook January 2015 business.westernunion.com.au
What s coming up Steven Dooley Currency Strategist APAC 2
History in the making! These are historic times US interest rates are one of the most important measures in the world. We have never had a period in which the key global rate has been steady for seven years and certainly not at zero. The US s ZIRP has caused massive moves: gold to almost $2000, US equities to all time highs, property markets to record levels How will the world cope with the end of easy money? (Hint: Very badly. It always has before.) 3
SGD: Shifting Sands The Singapore dollar has been one of the best performing currencies over the last 30 years. Only JPY and CHF have done better And why not? Singapore growth story has been magnificent The Singapore dollar has always been unique because the Singapore government manages monetary policy via the exchange rate (rather than interest rates) 4
USDSGD since 1981 USD/SGD Exchange Rate; Source: Reuters
SGD recently The US dollar has been the best-performing currency in 2014 as markets look towards to the first US interest rate increase in eight years, sometime in 2015 The Singapore dollar has also weakened after a series of poor Chinese numbers, including last week s disappointing Chinese import numbers and poor industrial production results 6 2014 Western Union Holdings, Inc.
USDSGD trades at four-year highs USD/SGD Exchange Rate; Source: Reuters
What drives the SGD? Increasingly, global trade is the driver of the SGD. As global trade drives SGD, we can identify early signals in Singapore balance of payments Singapore dollar now acts partly as an Asian safe haven but also as an proxy for Chinese growth 8
What does the market say? Reuters FX Poll of 22 currency analysts has found that most expect the USDSGD to stay steady or rally over the next 12 months Market analysts still have a broad range of forecasts with a 10-cent range from low to top This is a sign of uncertainty 9
What s next? Most analysts expect further USD gains as the Federal Reserve starts to raise interest rates. The market has started pricing in higher US rates towards Thus, a meaningful rally in USDSGD in late 2014 is widely expected The usual movement is 9%. If so, a move to 1.45 by the end of the year would not be unusual Technically, a break out of the consolidation pattern, above 1.2700. sets up a long-term move to 1.4000 10
Reuters Poll projects a higher USDSGD USD/SGD Exchange Rate; Source: Reuters
USDSGD forecasts 30 Jun 15 31 Dec 15 WUBS Forecast 1.3800 1.4400 1.3300 1.3300 USD/SGD Exchange Rate; Source: Reuters
Crazy? Or an average year? USD/SGD Exchange Rate; Source: Reuters
ASIA 14
China Ongoing strength likely to continue However, growth slowing CNY is one of the globe s quiet achievers 15
Hong Kong Tied to USD, likely to appreciate Will the peg be removed? 16
Japan Is Japan is a 25-year recession? Deflation can t be stopped Major pressure as BoJprints money 17
EUROPE 18
Eurozone Losing value as ECB prints money ECB meetings crucial Some analysts have EURUSD at 0.95 (20% fall) 19
UK UK recovering well Like the US, FIFO Higher UK rates should support 20
Switzerland Weighed down by Euro s falls Pushed higher versus Euro SNB intervening in market 21
REGION 22
Malaysia Likely to struggle as US rates climb Region s major oil exporter 23
Indonesia US rates also hurt, but more vulnerable Emerging markets most vulnerable 24
Australia Industrial commodities meltdown China slowdown? RBA might cut rates Housing the major risk 25
New Zealand Heavy selling pauses, economy supported Agricultural commodities haven t been hit RBNZ still considering raising rates 26
What can we do for you..??? 27
What can we do for you..??? It s a new year, so. Lean on us we are data rich Historical payment flow summaries Current hedge books with weighted averages Transaction summary reporting Credit lines (unsecured). Free up credit with your bank. 28 2015Western Union Holdings, Inc.
Hedging Webinar Series register today Basic Hedge Register Now! Why do companies hedge? Introduction to the Risk Management Cycle What are the basic hedge products? Creating cash flow visibility with WUBS FX Management tool Building a basic hedge profile How to avoid common hedging mistakes Advanced Hedging Register Now! The Risk Management Cycle (an advanced perspective) Risk Management Best Practice / Tailoring a Treasury Policy Chasing Yield Advanced hedging products Changing your strategy When, Why and How 29
Contact Us Do you have questions for Western Union Business Solutions? Contact one of our FX dealing specialists today Singapore 6494 8288 Website business.westernunion.sg Western Union Business Solutions is a division of The Western Union Company. Depending on the nature and scope of the services, services in Singapore are provided by Custom House Currency Exchange (Singapore) Pte Limited (Capital Markets Services Licence No. 100035-3) ( CH Singapore ), Western Union Business Solutions (Singapore) Pte Ltd (Remittance Licence No. 01230) ( WUBS Singapore ) and/or WUBS Financial Services (Singapore) Pte Ltd (Capital Markets Services Licence No. 100116-3) ( WUBS FS Singapore ) (collectively referred to as WUBS ). CH Singapore and WUBS FS Singapore are capital markets services licence holders for leveraged foreign exchange trading. WUBS Singapore is a remittance licence holder. All payment and remittance services referred to in this communication are offered under WUBS Singapore s Remittance Licence issued by the Monetary Authority of Singapore. WUBS Singapore s service does not include any service under the Payment Systems (Oversight) Act 2006. Nothing in this communication is intended or should be construed as an offer to provide services, solicitation, invitation to or inducement to engage in services provided by WUBS, save where the provision of the services by WUBS will not violate or give rise to any requirement under any relevant law, including the laws of Singapore. WUBS has based the opinions expressed herein on information generally available to the public. Nothing in this communication is intended to amount to opinion, recommendation or any other advice on contracts or arrangements for the purpose of foreign exchange trading, whether on a leveraged basis or otherwise. WUBS makes no warranty concerning the accuracy of this information and specifically disclaims any liability whatsoever for any loss arising from trading decisions based on the opinions expressed and information contained herein. Such information and opinions are for general information only and are not intended to present advice with respect to matters reviewed and commented upon. Relations between you and WUBS will be governed by the applicable terms and conditions. No representations, warranties or conditions of any kind, express or implied, are made in this communication. This communication is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use wouldbecontrary to law or regulation or which would subject WUBS and/or its affiliates to any registration or licensing requirement within such jurisdiction. All material presented herein, unless specifically indicated otherwise, is under copyright to Western Union Holdings, Inc..