Oil plunge leaves just two strong currencies
The Singapore dollar is the latest currency to register a sharp unexpected drop following action from the Monetary Authority of Singapore to ease monetary policy, which is fast leaving the United States and Switzerland as the only two countries not trying to devalue their currencies.
The question is – how long will that last for?
Many of the recent moves and talk from central banks in Canada, Eurozone, Australia and India have been a reaction to falling prices of oil and other major commodities. Japan, meanwhile has fully engaged in debasing JPY for some time. So many countries pursuing action to keep their currencies weak only piles more upward pressure on those that are not subject to such policies – namely the U.S. doolar and the Swiss franc.
The U.S. Federal Reserve has been priming the markets for a rate rise for some time now, which along with the end of its quantitative easing program has sent USD soaring. Looking at the history of the USD – extended multi-year rallies have happened before. A major one occurred in the late nineties and especially during the early to mid eighties when it soared. On the both occasions aggressively tightening monetary policy was a major driver.
EUR/USD – How much lower will U.S. authorities tolerate?