Singapore dollar to drop 2% by year-end on MAS easing, analysts say

The Singapore dollar will weaken about 2 per cent versus the US dollar by the end of the year.
The Singapore dollar will weaken about 2 per cent versus the US dollar by the end of the year. PHOTO: ST FILE

SINGAPORE (BLOOMBERG) - The Singapore currency will weaken about 2 per cent versus the US dollar by the end of the year after the Monetary Authority of Singapore (MAS) "slightly" reduced the pace of its gains versus those of its trading partners this month, according to a survey of analysts by Bloomberg News.

The Singdollar will slide to $1.42 per US dollar by the end of December after MAS probably lowered the slope of its appreciation against a basket of currencies to 0.5 per cent this month, from 1 per cent, according to the median estimate of 19 analysts. The projected level would still be stronger than the six-year low of $1.4366 reached on Oct 2.

The local dollar slipped 0.1 per cent to $1.3980 per US dollar at 8:39 am in Singapore. Oversea-Chinese Banking Corp. forecast it will tumble to $1.4570, the most bearish projection, while Mizuho Bank Ltd. saw it stronger at $1.39.

MAS, which uses the currency rather than interest rates to guide the economy, eased monetary policy on Oct 14 for the second time in 2015. Singapore avoided a technical recession in the third quarter, expanding 0.1 per cent from the previous three months, when it shrank a revised 2.5 per cent.

MAS guides the local currency against an undisclosed basket and adjusts the pace of appreciation or depreciation by changing the slope, width and centre of a band. It refrains from disclosing details of the basket, the band, and the pace of appreciation or depreciation.

"An even stronger policy easing in the most recent October review, including flattening the slope of the S$NEER policy band, was clearly unwarranted, as the Singapore economy was neither experiencing an outright retraction in economic activity nor widespread price declines," the monetary authority said in its semi-annual Macroeconomic Review released on Tuesday Oct 27).

The US dollar probably accounts for 22 per cent of the basket, while the ringgit and yuan about 15 per cent, according to the median estimate of eight of the analysts who provided the numbers.