Goldman switched to predicting a loss in the city's dollar over the next six months after a government report showed the economy slipped into recession in the third quarter and the Monetary Authority of Singapore said it will intervene to stem volatility in the currency.

The currency will drop 3.7 per cent to S$1.54, the lowest since August 2007, wrote Hong Kong-based economist Mark Tan and chief Asia economist Michael Buchanan in a research report today. Their previous estimate was S$1.45.

'The turmoil in global financial markets, the unprecedented scale of coordinated rate cuts by global central banks and the clearer, additional downside risks to growth made it increasingly likely the Monetary Authority was going to pursue a neutral stance,' according to the report from Wall Street's most profitable firm.

Singapore's dollar weakened 1 per cent, the biggest decline since August, to trade at S$1.4836 versus the US currency as of 1.19pm in Singapore, according to data compiled by Bloomberg. The city's dollar has dropped 9.3 per cent from a record high of S$1.3450 on July 16 and 8.5 per cent since the central bank last met on April 10.

A weaker currency may boost the economy, which entered its first recession since 2002. Gross domestic product contracted an annualised 6.3 per cent in the third quarter from the previous three months, after shrinking a revised 5.7 per cent between April and June.

The MAS manages the exchange rate within an undisclosed trading band versus a basket of currencies. The central bank said today there will be no re-centering of the band or change in the so-called width, the range in which it is allowed to trade.

The last time the central bank halted gains was in 2003 when the spread of the deadly severe acute respiratory syndrome virus, or SARS, brought the economy to a standstill and inflation slowed to less than 1 percent, said Bloomberg.

'The policy bias has definitely shifted to easing,' said Mr Tan in an interview. 'It's quite possible to shift to downward re-centering in April,' said Mr Tan, who predicted the central bank would only slow the pace of appreciation in a Bloomberg News survey.