ING Barings in Hong Kong is recommending clients enter a short Singapore dollar/U.S. dollar strangle in which investors win if the currency remains range-bound. Craig Chan, currency strategist, believes that weak export figures linked to a lack of global demand, capital outflows, and belief that the Monetary Authority of Singapore will permit a depreciation of the currency could cap recent Sing strength.
In the trade Chan suggests selling a three-month strangle, in which the investor sells a call struck at SGD1.85 and a put struck at SGD1.77, as well as purchasing a three-month forward at SGD 1.8105. The Sing was trading at SGD1.8195 Thursday. ING is recommending a three-month time frame on the deal because these options are liquid.