Singapore Dollar Re-Centered Upward

April 14, 2011

After its semi-annual monetary policy review, the Monetary Authority of Singapore (MAS) has re-centered the SGD target range upward but not so much that the range mid-point is above the currency’s present level.  The width of the trading band and the angle of its upward slope will remain as such were.  Last Octoberl, the range’s center was not changed, but its slope was steepened and width expanded.  The SGD had traded in the upper portion of the band and risen 3.5% on balance against the dollar since October 14. Officials first sanctioned greater scope for their exchange rate to appreciate at the review in April 2010, so today’s action marks the third straight tightening of credit policy.

MAS’s monetary policy is run through manipulation of the exchange rate rather than by changing domestic interest rates.  The reason for tightening is the same as elsewhere in Asia, to contain inflationary pressure amid higher commodity prices and brisk growth in domestic demand.  CPI inflation in Singapore was at 5.2% in the first two months of 2010, up from 3.4% in 3Q10.  A statement posted on the MAS website today projects full-2011 inflation near the top of the 3-4% forecast range.  Likewise, real GDP, which accelerated to an annualized first quarter-over-4Q10 pace of 23.5% after moderating in the second half of 2010, is projected to average near 6% this year, which would be the top of its 4-6% forecast range.  Real GDP last quarter was 8.5% greater than a year earlier.

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.



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