Deutsche Bank is recommending investors purchase an at-the-money forward U.S. dollar call against the Singapore dollar and finance the position by shorting a greenback/Sing dollar strangle. The strategy, known as a seagull, pays out if the Singapore dollar weakens or trades in a range against the U.S. dollar, according to Peter Redward, Asian currency strategist at Deutsche Bank in Singapore.
The German bank is advising investors to buy U.S. dollar calls, sell three-month Singapore dollar puts struck at SGD1.71 and sell three-month calls struck at SGD1.7550. The Singapore dollar was trading at 1.7580 in the spot market Wednesday. A rival foreign exchange trader in Singapore concurred that the strategy makes sense. "I see the U.S./Singapore dollar trading in a range, with a slight bias for a weaker Sing dollar," he commented.
Sanjeev Sanyal, regional economist for Asia at Deutsche Bank in Singapore, said the U.S. economic slowdown is starting to negatively impact Singapore. However, he believes the government and the Monetary Authority of Singapore will react quickly to the Singapore dollar weakening.
