SINGAPORE - Market commentaries suggesting that the Monetary Authority of Singapore had been intervening heavily to support Singapore's currency are incorrect, the central bank said on Tuesday.
These reports had "erroneously cited" the fall in Singapore's official foreign reserves and MAS' foreign exchange swaps since mid-2014 as an indication of heavy intervention by the central bank to support the Singapore dollar exchange rate, the MAS said in a statement responding to media queries.
Singapore's official foreign reserves declined by US$29 billion from June 2014 to March 2015, when they stood at US$249 billion. This came after an increase of US$105 billion over the preceding five years.
"Contrary to some reports, the recent decline was due to currency translation effects, rather than MAS' intervention operations. It reflected the sharp appreciation of the US dollar against the other major foreign currencies in the official foreign reserves," the MAS said.
About three-quarters of the official foreign reserves are denominated in the major G4 currencies - the US dollar, euro, British pound and Japanese yen, with no single currency allocation making up more than one-third of the composition.
Over the same June 2014 to March 2015 period, the stock of foreign exchange swaps ell by US$24 billion to US$34 billion.
Foreign exchange swaps are one of the money market instruments that MAS uses to manage liquidity in the banking system.
A substantial amount of foreign exchange swaps was accumulated by MAS during 2009 to 2011 when there were strong capital inflows to Singapore amid exceptional monetary easing in the major advanced economies, MAS said.
MAS has allowed its foreign exchange swaps to mature as it increased its reliance on MAS bills as a money market instrument.
Most of the proceeds from the maturing swaps were in excess of what MAS needed in the official foreign reserves to maintain confidence in the Singapore dollar, and hence were transferred to the Government for management by GIC over a longer investment horizon.
"This is hence a transfer of assets, not a reduction in Singapore's overall reserves," the statement said.