http://online.wsj.com/article/SB124169890739995817.html?mod=googlenews_wsj
The Wall Street Journal, 7 May 2009, COSTAS PARIS and P.R. VENKAT
Singapore Mulls Currency Intervention
SINGAPORE -- Singapore is ready to intervene in the currency market to brake the local dollar's rise, a person familiar with the situation said Thursday, while the central bank reaffirmed there is no change in its policy for the currency.
The Monetary Authority will buy the U.S. dollar "if it falls below S$1.4700, around S$1.4690," the person familiar with the situation said.
He said S$1.4700 to the U.S. dollar roughly equates with the strong end of the Singapore dollar in terms of the undisclosed trade-weighted band that the MAS uses to guide the currency.
These remarks were "a very strong signal" to the market that the MAS doesn't want the Singapore dollar pushing too high, a trader with a foreign bank said. But he predicted the local currency will continue to rise in coming days if there are no negative economic surprises.
A top central bank official separately reiterated that the MAS doesn't plan to deliberately drive the Singapore dollar lower over time. "We keep our monetary policy on the medium-term inflation outlook and taking into account growth prospects," Managing Director Heng Swee Keat said. "We don't use the currency for competitiveness because it is not sustainable to align currencies just for competitiveness."
Mr. Heng declined to comment on specific levels for the Singapore dollar. The MAS uses the exchange rate, rather than interest rates, as its chief policy tool, because trade flows dwarf the island's small domestic economy.
The central bank last month eased policy by lowering the midpoint of the Singapore dollar band. But it kept the slope of the trading band flat, surprising some market players who had expected the MAS to drive the local currency lower, via a downward slope for the policy band, in order to help exporters.
Traders say there have been rumors that the MAS intervened quietly in the market in recent days. The Singapore dollar has joined other Asian currencies and stock markets in climbing on improved risk appetite as the global recession shows signs of slowing and markets take heart at reported results of U.S. "stress tests" of the nation's major banks.
The U.S. dollar, which had traded as high as about S$1.58 in early March, has slid steadily in the past two months as global sentiment has rebounded. On Thursday, the U.S. dollar dipped to a four-month low of S$1.4691 -- just at the levels signaled as the MAS intervention zone -- before rising modestly.
The greenback was quoted at S$1.4718 Thursday. In addition to its importance for the MAS trading band, the S$1.4700 level represents a key technical level for the U.S. dollar. "The U.S. dollar is weakening in response to the risk rally," said Citigroup economist Kit Wei Zheng. Singapore "is also attracting capital inflows on the equity side, so that's pushing the Singapore dollar stronger," he said.
But while the mood among investors has brightened, export-dependent Singapore remains mired in its worst recession since independence in 1965. "Fundamentally as far as the Singapore economy, nothing has changed," said OCBC strategist Selena Ling, who forecasts the city-state's economy will contract between 6% and 9% this year.
"It's just all sentiment. It's just that people had expected the worst, so going from here they're looking for the upside - or they want to believe in the upside." The MAS's Mr. Heng said the central bank will stick to its policy. "Our assessment is that the current monetary policy stance remains appropriate," he said. "There are no new developments that cause us to change our stance."
------------------------
Latest updates at Singapore News Alternative:
1. Asia’s Export-Led Growth Model ‘Broken,’ Roubini Says
2. Singapore Mulls Currency Intervention To Keep Sing$ Depressed
3. Can Singapore be a new catwalk for global fashion?
4. LTA orders 22 trains for SMRT & NEL
5. VIETNAM travel market holds vast potential for Singapore despite economic downturn.
6. Singapore Pressured On Bank Secrecy; Set To Fight Back
7. Singapore warehouse delays frustrate metals traders
8. Temasek Has No Plan to Boost China Construction Stake
9. PSA, Wharf delay China port investment - official
10. SIA slams UK's proposal to increase Air Passenger Duty
11. Family comes first for Singaporeans: survey
12. More AirAsia Routes Connecting Singapore From Malaysia
13. Singapore lures large number of Saudi tourists
.
The Wall Street Journal, 7 May 2009, COSTAS PARIS and P.R. VENKAT
Singapore Mulls Currency Intervention
SINGAPORE -- Singapore is ready to intervene in the currency market to brake the local dollar's rise, a person familiar with the situation said Thursday, while the central bank reaffirmed there is no change in its policy for the currency.
The Monetary Authority will buy the U.S. dollar "if it falls below S$1.4700, around S$1.4690," the person familiar with the situation said.
He said S$1.4700 to the U.S. dollar roughly equates with the strong end of the Singapore dollar in terms of the undisclosed trade-weighted band that the MAS uses to guide the currency.
These remarks were "a very strong signal" to the market that the MAS doesn't want the Singapore dollar pushing too high, a trader with a foreign bank said. But he predicted the local currency will continue to rise in coming days if there are no negative economic surprises.
A top central bank official separately reiterated that the MAS doesn't plan to deliberately drive the Singapore dollar lower over time. "We keep our monetary policy on the medium-term inflation outlook and taking into account growth prospects," Managing Director Heng Swee Keat said. "We don't use the currency for competitiveness because it is not sustainable to align currencies just for competitiveness."
Mr. Heng declined to comment on specific levels for the Singapore dollar. The MAS uses the exchange rate, rather than interest rates, as its chief policy tool, because trade flows dwarf the island's small domestic economy.
The central bank last month eased policy by lowering the midpoint of the Singapore dollar band. But it kept the slope of the trading band flat, surprising some market players who had expected the MAS to drive the local currency lower, via a downward slope for the policy band, in order to help exporters.
Traders say there have been rumors that the MAS intervened quietly in the market in recent days. The Singapore dollar has joined other Asian currencies and stock markets in climbing on improved risk appetite as the global recession shows signs of slowing and markets take heart at reported results of U.S. "stress tests" of the nation's major banks.
The U.S. dollar, which had traded as high as about S$1.58 in early March, has slid steadily in the past two months as global sentiment has rebounded. On Thursday, the U.S. dollar dipped to a four-month low of S$1.4691 -- just at the levels signaled as the MAS intervention zone -- before rising modestly.
The greenback was quoted at S$1.4718 Thursday. In addition to its importance for the MAS trading band, the S$1.4700 level represents a key technical level for the U.S. dollar. "The U.S. dollar is weakening in response to the risk rally," said Citigroup economist Kit Wei Zheng. Singapore "is also attracting capital inflows on the equity side, so that's pushing the Singapore dollar stronger," he said.
But while the mood among investors has brightened, export-dependent Singapore remains mired in its worst recession since independence in 1965. "Fundamentally as far as the Singapore economy, nothing has changed," said OCBC strategist Selena Ling, who forecasts the city-state's economy will contract between 6% and 9% this year.
"It's just all sentiment. It's just that people had expected the worst, so going from here they're looking for the upside - or they want to believe in the upside." The MAS's Mr. Heng said the central bank will stick to its policy. "Our assessment is that the current monetary policy stance remains appropriate," he said. "There are no new developments that cause us to change our stance."
------------------------
Latest updates at Singapore News Alternative:
1. Asia’s Export-Led Growth Model ‘Broken,’ Roubini Says
2. Singapore Mulls Currency Intervention To Keep Sing$ Depressed
3. Can Singapore be a new catwalk for global fashion?
4. LTA orders 22 trains for SMRT & NEL
5. VIETNAM travel market holds vast potential for Singapore despite economic downturn.
6. Singapore Pressured On Bank Secrecy; Set To Fight Back
7. Singapore warehouse delays frustrate metals traders
8. Temasek Has No Plan to Boost China Construction Stake
9. PSA, Wharf delay China port investment - official
10. SIA slams UK's proposal to increase Air Passenger Duty
11. Family comes first for Singaporeans: survey
12. More AirAsia Routes Connecting Singapore From Malaysia
13. Singapore lures large number of Saudi tourists
.
