Portfolio | Singapore’s currency move bodes well for exporters
Investors are likely chase up exporters and shun banking and property plays with the Singaporean dollar poised to lose ground against the US dollar
Singapore’s decision this week to put a brake on an appreciating currency surprised some analysts and leaves the island state to deftly juggle a slowing economy against the threat of rising inflation.
The Monetary Authority of Singapore, the country's central bank, said it would “reduce slightly” the speed at which the Singapore dollar moves upwards within a target band against a basket of major currencies.
“This measured adjustment follows the move to reduce the rate of appreciation of the policy band in January this year, and is supportive of economic growth into 2016, while ensuring price stability over the medium term,” the MAS said in a statement Wednesday.
The benchmark Straits Times Index, down more than 15 per cent since the summer, initially fell Wednesday before recovering to close down just 0.03 per cent at 2,983.92 points, while the Singapore dollar strengthened 1.3 per cent to 1.38 per US dollar, its highest since 2010.
The “surprise” adjustment “was less dovish than the market had expected,” wrote economists at HSBC.
MAS’s announcement followed a succession of weak economic data that showed the city brushed close to a technical recession last quarter, but the outlook remains mixed as MAS said it expects inflation and oil prices to pick up in tandem next year.
