Singapore interest rates rise

The 3 month fixing SOR has gone up 0.10% for 2 consecutive days. This is probably attributed to the rising US dollar (falling Singapore dollar). According to interest-rate parity theory, the interest rate has to rise to make up for a fall in the currency so that it maintains parity with another currency.

For home owners on a floating-rate loan package who are keeping track of interest rate movements, perhaps this latest development in foreign exchange points to the need to keep abreast with developments in USD/SGD rates. Among the factors commonly cited for the dollar rise is the softening commodities prices. This report gives some interesting insight as to who was buying the dollar.

How much more will the US dollar rise? Some analysts think “the 5.1 percent growth of dollar against the basket of the 6 most-traded currencies that was seen in the past 3 weeks can’t be sustained by the American economy” (see article). Nevertheless, the US Dollar Index (USDX) is trading above 76 and the futures point to even higher quotes. Only time will tell.

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