Singapore FX market riding high on world events
The southeast Asian FX market is on fire and it is set to get a further boost thanks to a combination of political and economic turbulence, a regulator committed to facilitating infrastructure investment and increased interest from non-bank market makers.
In June, the Singapore Exchange (SGX) recorded unprecedented levels of forex futures trading, while Investment Trends’ 2017 Singapore contracts for difference (CFD) and FX report refers to a 7% increase in the number of active CFD/FX traders last year compared with 2016.
Jeff Ward, global head of non-deliverable forwards and forwards, and head of FX Asia at NEX Markets, observes that a number of geopolitical and macro-economic events have driven currency volumes on the SGX.
Among them: talk of trade wars between China and the US; plus the recent strength of the US economy and rising US interest rates strengthening the dollar and making yields in emerging markets (EMs) less attractive, further weakening Asian EM pairs.
The weakness in the Turkish lira, fuelled by domestic policies and US sanctions, has added further pressure to EM currencies as investors fret about risk, he adds.
The main SGX contracts are offshore renminbi (CNH) and, to a lesser extent, Indian rupee (INR), notes Richard Leighton, CEO of agency broker DeepWell Liquidity Management. He says SGX appears to have taken some market share from the Hong Kong Stock Exchange in June in CNH futures.