Singapore dollar tumbles after surprise MAS easing

Singapore's dollar dropped for a second day as the Monetary Authority of Singapore (MAS) said it will seek a policy of zero appreciation.
Singapore's dollar dropped for a second day as the Monetary Authority of Singapore (MAS) said it will seek a policy of zero appreciation. PHOTO: THE NEW PAPER

SINGAPORE (BLOOMBERG) - Singapore's dollar fell the most since November after the central bank unexpectedly eased monetary policy to combat growing global growth threats to the trade-dependent economy.

The local currency dropped for a second day as the Monetary Authority of Singapore (MAS) said in a statement on Thursday (April 14) it will seek a policy of zero appreciation against an undisclosed basket of currencies.

The Singdollar fell 0.9 per cent to S$1.3626 against the US currency as of 8.35am local time. That's the biggest decline since Nov 6.

 
 
 
 

The Singdollar also weakened against the Malaysian currency after the news, with the ringgit trading at 2.8541 to the Singdollar at 8.37am, from Wednesday's close of 2.8678. At 9.25am, the ringgit was trading at 2.8637 to the Singapore currency.

The MAS had had a policy of modest and gradual appreciation since April 2010. The economy stagnated in the first quarter from the previous three months, when it expanded 6.2 per cent on a seasonally adjusted, annualised basis, the Trade Ministry also reported on Thursday.

"There's been a deterioration of economic conditions since the last meeting," said Mr Philip Wee, senior currency economist at DBS Group Holdings. "If things have already worsened why wait for October to ease?"

This was the central bank's second unexpected decision in less than 16 months. It made an emergency policy change in January last year to combat the threat of deflation following a slump in oil prices. Twelve of 18 economists surveyed by Bloomberg predicted the central bank would maintain policy on Thursday, while the rest forecast it would ease.

MAS guides the local dollar against a basket of its counterparts and adjusts the pace of its appreciation or depreciation by changing the slope, width and centre of a currency band. It doesn't disclose details on the basket, or the band or the pace of appreciation or depreciation. The MAS has two scheduled policy announcements a year, one in April and the other in October.

"We thought the hurdle was high for a shift to neutral," said Mr Khoon Goh, a senior foreign-exchange strategist at Australia & New Zealand Banking Group Ltd in Singapore. "Although the MAS said that they have no intention to depreciate the domestic currency, I don't see this as necessarily the end of the easing cycle. If downside growth and inflation risks remain, then the next easing move would be a re-centring in October."