(Bloomberg) -- The Singapore dollar is emerging as a popular US election trade for option investors.
The premium to purchase a one-month call option, which increases in value if the dollar gains against the Singapore equivalent, compared to a downside put, is near its highest since May 2023. On the Depository Trust & Clearing Corporation so far this week, all notional trades near or over $100 million on the currency pair have been call options, with maturities up to Jan. 22.
Most central banks manage their economies through setting interest rates, but the Monetary Authority of Singapore does so by influencing the Singapore dollar’s nominal effective exchange rate, which is benchmarked against a basket of currencies of its major trading partners. That makes it effective as a proxy for macro investors wagering on Donald Trump winning the US presidential election.
“The general sentiment is that, in the event of a Trump win, it would be bullish for the dollar against its major peers, but even more so against Asia,” said Mukund Daga, Singapore-based head of FX options for Asia at Barclays. Hedge funds have shown interest in buying Singapore dollar call options expiring in the next three months, he said.
Traders said investors are also positioning for the greenback to strengthen versus currencies such as the euro and yuan that may be affected by tariff measures, should Donald Trump win the US presidential election.
“There has been a lot of market interest in at-the-money USD/SGD options,” said Alvin Tan, Singapore-based head of Asia FX strategy at RBC Capital Markets. For both the onshore yuan and Singapore dollar, “implied volatility appears very bid in the market.”
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