Thread by @Trinhnomics

Morning, flash PMI day (prelim Sep figures for). Eyes on Germany's manu - was low at 43.5 in August & expectations are at 44. The Eurozone markets expect a tiny PMI bounce.

In Asia, we got Singapore CPI which to be sub 1% for core & will motivate the MAS to keep a competitive FX

Singapore is the only country in APAC that targets the nominal exchange rate (NEER). It doesn't mean it doesn't care for interest rates like the SIBOR (SOR will likely be altered given the transition out of LIBOR by 2021) but it means that the policy statement is SNEER focused.

Let me explain in layman term what this means: weighted index & weights based trade relationship. Let's imagine that Singapore trades only w/ Malaysia & China & it's 40% & 60% of total trade. An index would be:
SNEER = MYR*.4 + CNY*.6
In reality SNEER is made of of a lot of pairs

These pairs'd have a weight & all add up to 100. You get a time series of this & then you can base it on a yr. To base something, u take the value/by the value of time u want to set the base. Meaning, u're just calculating change over a static time
Base =1999👇🏻so now 26.9% higher

Let me show u what this looks like if you don't make a NEER: That is the SGD/CNY & SGD/MYR. Note that the SGD appreciated against the CNY lately but flat vs MYR.

Imagine a lot of FX pairs & this is a MESS to look at the SGD relative value to those it cares about (trade a lot w/)

Let me show u how SGD has performed vs regional FX year to date. Economists don't just look at SGD vs USD but also SGD vs CNY, MYR, INR, IDR, VND etc.

Below shows u that the DECLINE of the SNEER recent is shown here as SGD weaker than THB, IDR, JPY, PHP, VND, TWD, MYR 👇🏻

Why?

This takes u back to the tweet storms on economic data (exports & imports, retail sales, CPI etc). All these things tell you Singaporean economy is weak & can't afford a strong FX b/c it relies on EXTERNAL demand to grow (got demographic issues & city developed city state).

So..

What makes it WORSE is that other economies like South Korea, China , India all have a weaker FX & that is not good news for price competitiveness of the externally dependent Singaporean economy & hence the central bank (MAS) cares about this. Not to say it doesn't care for rates