Singapore tightens monetary policy

SINGAPORE: The Singapore dollar hit a new record against the US dollar after the Monetary Authority of Singapore (MAS) tightened its monetary policy on Thursday, in a bid to keep a lid on inflation as data showed the economy grew an annual 8.5 per cent in the first quarter.

The Singapore dollar rose to a high of $1.24 against the greenback on Thursday but analysts said the policy may likely see the Sing dollar trade at between 1.20 and 1.21 by year-end.

In its latest semi-annual review, MAS said the exchange rate policy band will be re-centred below the prevailing level of the Sing dollar Nominal Effective Exchange Rate.

In its latest semi-annual review, the central bank said it is re-centring the exchange rate policy band upwards.

The recentring will be below the prevailing level of the Singapore dollar Nominal Effective Exchange Rate and there will be no change to the slope and width of the band.

This will translate to a gradual appreciation of Singapore dollar.

Analysts said the move was less aggressive than expected, but the pre-emptive approach will likely put a lid on rising costs.

Some analysts added a modest rise in the Singapore dollar is not likely to hurt export competitiveness.

A firmer currency may even help exporters and businesses that source for goods and services from abroad.

The Singapore dollar rose to a high of $1.24 against the greenback on Thursday but analysts said the policy may likely see the Sing dollar trade at between 1.20 and 1.21 by year-end.

Thio Chin Loo, Senior Forex and Interest Rate Strategist (Asia) with BNP Paribas said: "I think this appreciation bias will help to keep cost pressures down and that will help to work in favour of the headline inflation staying low. For the ordinary Singaporean, I think it means that hopefully with a strong Sing dollar, that cost push prices will be fairly maintained.

"So in terms of let's say shopping in the shopping centers, retailers may not need to raise prices too much because a strong Sing dollar helps to curb imported inflation."