Singdollar’s outperformance of Asian currencies may end soon—Bloomberg report

SINGAPORE: A Monday morning (March 24) report in Bloomberg says that the Singapore dollar may end its run as the top-performing currency in Asia this year because the Monetary Authority of Singapore (MAS) could start loosening policy by as early as next month.

Singapore’s currency has enjoyed being in pole position in Asia for two consecutive years. MAS uses the Singdollar’s exchange rate instead of interest rates as its main policy tool.

The country’s central bank has allowed the Singdollar to “appreciate against major trading partners’ currencies to counter price pressures,” Bloomberg reported, a situation that may well change as inflation levels begin to curb.

The piece quotes Mr Peter Chia, an FX strategist at United Overseas Bank (UOB), saying, “The period of Singapore dollar’s outperformance may be ending as we expect the MAS to commence monetary policy normalization” next month.

He added that although the Singapore dollar could still gain strength against the US dollar, this may not be the case for other Asian currencies.

In January however, MAS said that there would be no change in monetary policy as inflation slowed. The central bank said it would “maintain the prevailing rate of appreciation of the S$NEER (Singapore dollar nominal effective exchange rate) policy band” and that there would be “no change to its width and the level at which it is centred.”

Read related:MAS: No change in monetary policy as inflation slows

MAS added that it predicted a stronger Singapore economy this year, provided there would be no unexpected global shocks.

MAS also said that the growth for 2024 is expected to become more widespread, though Core Inflation might stay somewhat high in early 2024 before easing in the last quarter of the year.

This year, the Singdollar has slipped by around 2 per cent against the US dollar and is now in “the middle of the pack in Asia,” Bloomberg reported.

If MAS were to change its monetary settings, the Singdollar may face even more trouble, making it unlikely that it will emerge victorious in the region for the third year in a row.

Earlier this month, in the most recent survey of professional forecasters from the Monetary Authority of Singapore (MAS), economists increased Singapore’s growth forecast to 2.4 per cent, slightly higher than the previous forecast of 2.3 per cent.

The survey was released every quarter and published by MAS on Mar 13. It also showed that the forecasters predict headline inflation for this year to be at 3.1 per cent. The previous forecast had been at 3.4 per cent. /TISG

Read also: Economists raise growth forecast, predict lower headline inflation for 2024 — Singapore News