SINGAPORE (Dow Jones)--The Singapore dollar was stronger against the U.S. dollar late Friday as investors cheered successful Spanish and Italian bond sales and the European Central Bank's decision to hold interest rates.
The news fueled hope for improvements in a flagging European economy, and helped markets overcome the disappointment of somber U.S. economic data. The U.S. dollar drifted southward for most of the session, falling as low as S$1.2857 after changing hands at S$1.2938 late Asia Thursday.
"There's a breath of optimism in the air. Global risk appetite seems to be stabilizing, the bond auctions in Europe went well, and the ECB's decision suggests that things might be turning around in the European economy," Selena Ling, head of treasury research at OCBC, said.
However, Maybank warned that "tensions in Iran could possibly be a source of sharp risk aversion... We are of the view that even an attempt to blockade the Straits of Hormuz by Iran would cause a kneejerk [spike in oil prices] and sudden risk aversion."
Meanwhile, Asian currencies are likely to keep treading water with a slight appreciating bias ahead of significant economic or geopolitical events, the house added. It tipped the U.S. dollar to trade within a S$1.2800-S$1.2950 range in the near term.
Singapore government bonds stayed relatively flat as investors eschewed safe-haven assets amid strong showings on the local stock market.
-By Chun Han Wong, Dow Jones Newswires; +65 64154 160; chunhan.wong@dowjones.com
