Banks

Banks: SGD dep'n against USD has suddenly accelerated and SIBOR/SOR rates are on an accentuated uptick (3M S$ SIBOR rates, previously frozen at 0.4% for the longest time, jumped to 0.64%. 3M SOR jumped from 0.4% at end-Dec, to 0.93%.) Based on interest rate parity, CIMB examines current global situation. USD strength has increased on Grexit killing EUR amid the already weak JPY. As USD strengthens, interest rate parity is driving sell SGD, buy USD. S$ SOR, being the free-market rate set by all forex participants is galloping away. I.e. if Grexit fears die down, current period of USD strength could pause and S$ SIBOR can see a slight retreat. Though rising interest rates is a key 2015 theme, surge in SIBOR isn’t the real deal. When FFR rises, SIBOR will be pulled along more sustainably.