SINGAPORE - A key benchmark interest rate here rose on Wednesday after a surprise move by the central bank to ease its monetary policy.
The three-month Singapore Interbank Offered Rate (Sibor), which is commonly used to set many floating-rate home loans, rose to 0.653 per cent on Wednesday, a 1.3 per cent jump from Tuesday's 0.644 per cent.
The Monetary Authority of Singapore unexpectedly announced it would slow the appreciation of the Sing dollar on Wednesday.
A weaker Sing dollar leads to capital outflows, tightening liquidity conditions and causing interest rates to rise.
The three-month Sibor hit a high of 0.654 per cent on Jan 15 this year.
It has been on the upswing since the start of the year on the back of continued weakness in the Sing dollar, expectations of an interest rate hike in the United States and higher bank liquidity guidelines.
The Sibor, which is the rate that banks here lend to one another, is highly correlated to US interest rates.
Local banks that have had to adhere to the Basel III global banking rules that came into effect this year to set aside more funds as buffer likely also competed for funds, driving up Sibor.