Singapore Dollar Devalued Less Than Expected

April 14, 2009

The Monetary Authority of Singapore (MAS) adjusts monetary policy by raising or lower its target trading band for the Singapore dollar against a basket of other currencies.  Because of severe recession where GDP fell around 18% at an annual rate over the past two calendar quarters and substantially lower inflation, a significant devaluation of at least 4% had been anticipated at this week’s semi-annual MAS policy review.  Instead, officials observed that the currency had been trading in the lower half of its band lately and merely re-centered the band on present levels.  The effective devaluation amounted to only 1.5-2% as a result.  The statement released by monetary officials anticipated market surprise and explicitly concludes that “there is no reason for undue depreciation of the Singapore dollar” to remove any ambiguity regarding its guardedly upbeat assessment.  Officials are confident that recovery will ensue without an additional competitive devaluation.  Three-month inter-bank interest rates had fallen 119 basis points in the past six months to an amply accommodative 0.69%.

Copyright 2009 Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.


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