USDSGD and the managed band

[Fairman]

USDSGD and the managed band

Singapore doesn't set interest rates in the usual way. The monetary authority manages the currency against a basket, allowing it to move within an undisclosed band. USDSGD therefore moves differently from freely floating pairs.

Daily ranges are small, often 30 to 60 pips. Moves have a smoothness that looks odd compared to the jumpiness of other pairs. Trends can persist for weeks, since policy leans against sharp reversals.

For a scalper, the pair offers little: spreads are wide for the range, and the smooth trend drifts rarely offer clean entry points. It's more of a macro instrument than a trading vehicle.

The policy meetings, held twice a year, are the big events. A change in the slope of the band can move the pair by hundreds of pips in a day, something the quiet chart gives no hint of.

Studying how the pair responded to past policy announcements makes the risk obvious. The calm is real, and so is the tail.

How does the spread on USDSGD sit next to its daily range on the broker used here?

[Fairman]

The Monetary Authority of Singapore manages the Singapore dollar against a basket of currencies, called the S$NEER, rather than using interest rates as its main tool. The MAS sets a policy band for the S$NEER and adjusts its slope, width or centre to tighten or ease policy. USD/SGD moves reflect both the US dollar's strength and the MAS policy stance. Because the S$NEER is managed within a band, USD/SGD tends to be less volatile than many pairs, though it can still move significantly when the US dollar moves broadly. It is quite different from most pairs.

[Amanhasnoname]

I traded USDSGD for about three weeks a couple of years ago because the chart looked so clean, and it taught me a quick lesson about spread against range. On my account the spread was around 3.5 pips while the typical hour moved perhaps 6 or 7, so I was giving away half of every realistic target. Even on a good day with a 45 pip range, there was rarely a clean entry, only a slow drift in one direction.

The check I'd suggest is simple. Take the average daily range over the last twenty sessions, divide it by the typical spread you see at the time you trade, and compare that ratio with EURUSD. On my broker EURUSD gave me a figure above 50, and USDSGD was closer to 12, which settled it.

I still keep the pair on a watchlist, but only to see how it reacts when the policy meetings come around. The quiet chart is not a reason to relax about size.