FX168 Financial News Agency (Asia Pacific) News The US presidential election on November 5 is approaching, and the foreign exchange market is undergoing a new change. The Singapore dollar is gradually becoming the preferred trading currency for US election options investors. Bloomberg reported that hedge funds are turning to betting on the Singapore dollar, with traders positioning for the US dollar/Singapore dollar to rise, leading to a significant increase in the speculative cost of the Singapore currency.

Compared with buying put options, the premium for buying one-month call options is near the highest level since May 2023. If the US dollar/Singapore dollar rises, the value of the call option will increase. #US Election#

As of the end of this week, in US custody trusts and settlement companies, all nominal transactions close to or exceeding 0.1 billion US dollars are call options for the currency, with the latest maturity date being January 22.

Most central banks manage their economies by setting interest rates, but the Monetary Authority of Singapore achieves this by influencing the nominal effective exchange rate of the Singapore dollar, which is pegged to a basket of currencies from Singapore's major trading partners. This makes the Singapore dollar an effective indicator for macro investors betting on Donald Trump winning the US presidential election.

Barclays' Asia Pacific Head of FX Options in Singapore, Mukund Daga, said: "The general belief is that if Trump wins, the US dollar will be bullish against other major currencies, especially against Asian currencies."

He said that hedge funds have shown interest in buying call options for the US dollar/Singapore dollar expiring in the next three months.

(Source: Bloomberg)

Traders believe that if former US President Donald Trump wins the US presidential election, investors will also bet on currencies such as the US dollar/euro that may strengthen due to tariff measures.

Alvin Tan, Asia forex strategist at Royal Bank of Canada's capital markets in Singapore, said, "The market has a great interest in the USD/SGD at-the-money options."

Regarding the Singapore Dollar,Implied volatilityseems to be very high in the market.

This week, US data includes the September core personal consumption expenditure (PCE) price index released on Thursday, which is the Fed's preferred inflation measure, and the key Non-Farm Payrolls (NFP) report on Friday.

Nevertheless, ahead of the data releases that may determine the Fed's policy direction, the USD index is expected to record the largest monthly gain in two and a half years, and remain near three-month highs.

The US Labor Department's Job Openings and Labor Turnover Survey (JOLTS) showed that job vacancies in September fell to the lowest level in three and a half years, and last month's data was also revised down, signaling a continued cooling in the labor market.

Meanwhile, with the improvement in labor market awareness, US consumer confidence rose to a nine-month high in October.

Monex USA Trading Deputy Director Helen Given said: "Even though September'sNon-farm employmentfar higher than expected, we still see a pattern of slowing employment, which has been the overall theme for the past few months."

However, she noted that considering the inherent risks of the November 5th election and next week's Fed meeting, she believes the downside space for the US dollar remains limited.

Recent data highlights the resilience of the US economy, coupled with increasing market bets on Trump defeating Vice President Kamala Harris in the election, which jointly supported the dollar and pushed up US Treasury yields.

The US dollar index has risen 3.6% so far in October, marking its best monthly performance since April 2022. The index is currently at 104.34, with all major currencies except the British Pound rising this year.

Boston State Street Bank's Senior Global Market Strategist Marvin Loh said: "We are influenced by the election, and we still anticipate that, as everyone has long said, the election results will be quite intense."