Agreement on the India-Malaysia trade pact is positive for the Singapore dollar; the market is entering a correction phase

The Asian markets have recently become more active, driven by progress in trade negotiations. The Singapore dollar is particularly attracting attention, reflecting sensitive reactions to geopolitical changes. The tariff negotiations between the United States and India, which have been ongoing, are expected to be resolved within this month, and market sentiment is beginning to recover from previous risk-averse attitudes.

Impact of Improved US-India Relations on the Singapore Dollar

The US President Trump’s announcement of a tariff reduction policy has brought significant reassurance to the market. Previously, a 25% tariff rate was in place, but it has been announced that it will be gradually reduced to 18%. This policy shift symbolizes an improvement in economic relations with India and serves as a factor that enhances overall regional risk sentiment.

The Singapore dollar tends to be highly responsive to regional economic conditions, so positive developments like this are likely to be directly reflected in the exchange rate. During Asian trading hours, the Singapore dollar has shown a modest but steady strength against the US dollar, indicating a positive market sentiment among participants.

Analyst Outlook on Currency Pair

The foreign exchange team at OCBC Bank has conducted a detailed analysis of the current market environment. They note that if risk sentiment remains stable and upward pressure on the US dollar diminishes, the rally in the currency pair may temporarily pause.

It is expected that the USD/SGD pair will trade within a range of 1.2680 to 1.2760. Currently, the rate is around 1.2710, placing it near the middle of this range. In the short term, fluctuations within this band are likely to dominate, and the possibility of a sharp reversal is considered limited.

Next Market Focus

Factors that will influence the future movement of the Singapore dollar include the maintenance of risk sentiment and the strength of the US dollar. The current exchange rate levels incorporate reduced geopolitical uncertainty and expectations of economic data improvements. Whether these factors will persist remains a key point for the market. The 0.1% decline indicated by LSEG data suggests that the market is still in the early stages of a correction, and attention will be focused on the overall movement of the Asian markets, including the Singapore dollar.