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

Are you bullish or bearish on the USD/SGD, USD/JPY, AUD/USD and other forex pairs? Either way you can buy (long) or sell (short) the asset using derivatives like CFDs.

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:

  • Decide how you’d like to trade forex
  • Learn how the forex market works
  • Open a live or demo IG account
  • Build a trading plan
  • Choose your forex trading platform
  • Open, monitor and close your first position

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Start trading forex today

Trade the largest and most volatile financial market in the world.

  • Spreads start at just 0.6 points on EUR/USD
  • Analyse market movements with our essential selection of charts
  • Speculate from a range of platforms, including on mobile

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
Sell
Buy
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Sell
Buy
Updated
Change

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Sell
Buy
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
China 300
-
-
-
-

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

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.