SINGAPORE (Oct 2): With the Singapore dollar down 8.4% year-to-date against the US dollar, everyone’s favourite game in town is predicting just how low could it go against the almighty greenback in the aftermath of the now inevitable December interest rate hike by the US Federal Reserve.

Siddharth Mathur, Forex and Interest Rastes strategist at Citigroup, believes a lot of people are bearish about the Singapore dollar for the right reasons.

“Undeniably, the most crowded position in emerging Asia was to be long USDSGD,” the Citigroup strategist says in a note published today.

That’s buying US dollars and selling Singapore dollars in plain speak.

“The position was seen as an excellent and cheap proxy for USD / Asia,” he notes.  

That trade has also allowed “a lower-beta exposure to (Chinese Yuan) and the best way to position for more MAS easing,” he notes.

The risk that MAS may leave policy settings unchanged at the October review was seen to have fallen after recent soft data and subtle shifts in official communication,” writes Mathur.

“Emboldened by the observation that the trade-weighted SGD had lagged the repricing of other (emerging markets)  currencies, investors appear unafraid that the crowded trade may fail to perform even if the MAS lowered the slope of the NEER or Nominal Effective Exchange Rate band,” the Citigroup strategist says.

 At 3.30pm Singapore time Singapore dollar was trading 1.4337 to US dollar.