USD/SGD climbs as investors react to China’s 'controversial' security law
With China set to pass a new national security law to be implemented in Hong Kong, risk sentiments across Asian markets fell on Friday.
The USD/SGD forex pair is on the ascend again, after four consecutive days of decline.
China proposes national security law in response to Hong Kong protests
The US dollar rallied over 0.50% against the Singapore dollar on Friday 22 May 2020 morning, as Asian equity markets entered a sell-off mode triggered by China’s decision to pass a national security law that has been described as ‘controversial’ in relation to Hong Kong.
China’s rubber stamp parliament National People’s Congress (NPC) are in session on Friday to debate the proposed law, which the South China Morning Post reported could ban secession, foreign interference, "terrorism" and all seditious activities targeting the Chinese central government in Beijing.
Xinhua News Agency reported that the parliament will review a bill ‘on establishing and improving the legal system and enforcement mechanisms for the Hong Kong Special Administrative Region to safeguard national security’.
The bill is being viewed by opposition lawmakers and human rights activists as an infringement on Hong Kong’s already-limited liberties, and the end of the ‘one country, two systems’ framework that semi-autonomous territory was supposed to enjoy until 2047.
On Thursday, the US State Department also warned that ‘any effort to impose national security legislation that does not reflect the will of the people of Hong Kong" would be met with international condemnation’.
IG is a world-leading online trading and investments provider for thousands of financial markets. With CFDs (read about CFDs here), you can buy long or sell short on the USD/SGD, USD/JPY, AUD/SGD and other forex pairs depending on whether you think prices will rise or fall. Start today by opening an IG account.
Asian indexes and currencies react negatively
Following the news, the Hang Seng Index went down over 4.0%, as unrest concerns flared up again in the financial hub, after having endured seven months of protests in 2019.
This created a ripple effect across Asian equity markets, with all Asian indices in the red. Among the biggest losers were Singapore’s Straits Times Index (STI Index) and Shanghai Shenzhen CSI 300 index, which slid 1.98% and 1.59% respectively as at mid-day.
This latest move, said IG Asia market analyst Pan Jingyi, also ‘overshadowed’ China's fiscal stimulus from Friday's NPC, in which the government said it will issue one trillion yuan in special treasury bonds, capped at a quota of 3.75 trillion yuan (US$527 billion) – versus 2.15 trillion yuan in 2019.
Asian currencies, including the Singapore dollar, also slumped as risk sentiments worsened, as investors sought to ‘de-risk by selling Asian currencies against the USD’, Pan added.
The Malaysian Ringgit (MYR) quickly depreciated 0.36% against the USD on Friday morning, while the Korean Won retreated 0.53% as investors opted for alternatives.
US dollar rallies could continue into the weekend
For the most part of this week, the USD/SGD had been on a downward trajectory, thanks in large part to improved market sentiments on the back of positive early-stage trial results for a coronavirus vaccine emerging from US drugmaker Moderna’s laboratories.
But with China moving into decisive action against Hong Kong, and anticipation of further fallout with the US, the greenback could continue to rally against the Singdollar and other Asian currencies over the weekend.
As at 13:45 SGT on 22 May 2020, the USD to SGD exchange rate stands at US$1.00000 to S$1.42148, based on live IG data.
How to trade forex with IG
Learning how to trade any market can seem daunting, so we’ve broken forex trading down into some simple steps to help you get started:
The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.
Start trading forex today
Find opportunity on the world’s most-traded – and most-volatile – financial market
- Trade spreads from just 0.6 points on EUR/USD
- Analyse with clear, fast charts
- Speculate wherever you are with our intuitive mobile apps
See an FX opportunity?
Try a risk-free trade in your demo account, and see whether you’re onto something.
- Log in to your demo
- Take your position
- See whether your hunch pays off
See an FX opportunity?
Don’t miss your chance – upgrade to a live account to take advantage.
- Get spreads from just 0.6 points on popular pairs
- Analyse and deal seamlessly on fast, intuitive charts
- See and react to breaking news in-platform
See an FX opportunity?
Don’t miss your chance. Log in to take your position.
Live prices on most popular markets
You might be interested in…
Find out what charges your trades could incur with our transparent fee structure.
Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.
Stay on top of upcoming market-moving events with our customisable economic calendar.