USDSGD likely to close in the range of 1.51 to 1.53 year end 2008.

The strength of the USD against all other G7 currencies and also the SGD took everyone by surprise given the financial crisis that the U.S. has been facing the past quarter.

In our last blog article, we shared with you that there are five reasons that explains the strength in the U.S. Dollar. Two of the reasons have proved to be more significant in the last two months: -

The repatriation and deleveraging are still on going and the economic status of other G7 countries and Singapore relatively to the U.S., has changed drastically.

Repatriation and deleveraging - We have experienced very strong capital flows going back to the U.S., flows that are triple that of the monthly average in the past five years. Many U.S. companies are bringing back U.S. Dollars to shore up their capital base and to defend the company. These fund flows are a combination of both unleveraged flows and also leveraged flows and it is impossible to determine the ratio between the two except to say that leveraged flows are probably the larger of the two. The U.S. has been living off credit for the past 30 years. It is estimated that credit as a ratio to capital base in the U.S. has increased by more than 10 times in the past 30 years. There was and is considerable borrowing in JPY because it has the lowest interest rates. The unwinding of the leverage would mean the buying of JPY and the selling of USD which explains the strength in the JPY by 15 big figures from 111 to 95.50. Please beware that the deleveraging is not completed yet. We have only experienced the first wave of deleveraging, and we suspect that there will be another ‘tsunami’ like deleveraging during the first quarter of 2009.

Relative comparison in economic health between Singapore and the U.S. - Shocking news of Singapore negative third quarter GDP numbers clearly sent out strong signals that Singapore’s position as a recession proof economy crumbled. The manufacturing sector which is an engine of growth for Singapore posted a negative 11% in Q3. The GDP forecast outlook for Singapore has been adjusted from 2% to 4% to -1% to 2% for 2009. The saving grace for Singapore is our strong surpluses and capital inflow from foreign companies setting up businesses in Singapore. Do bear in mind that the public arena has been talking about a recession in the U.S. for the past seven months. The first talk of a possible recession in Singapore was this month just prior to the GDP numbers to be announced by the MAS.

The above two reasons itself will give USD strength to keep in the range of 1.52 to 1.55 during the first half of 2009.

Where will USD/SGD be for the rest of 2009, please continue to stay tune in to our blogsite.

Our sister company, HWH Inc. will also be posting an article on our outlook for Singapore equities shortly at; www.hwhglobal.ning.com