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Singapore dollar sinks on policy shift

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The Singapore dollar slid to its weakest level since 2010 after the monetary authority unexpectedly adjusted its currency policy.

[SINGAPORE] The Singapore dollar slid to its weakest level since 2010 after the monetary authority unexpectedly adjusted its currency policy. US index futures climbed as Apple Inc and Yahoo! Inc gained in post-market trading after reporting earnings, while Asian stocks dropped with oil.

Singapore's dollar sank as much as 1.3 per cent by 10:10 am in Tokyo as policy makers reduced the slope of their currency band, citing a weaker outlook for inflation. The Australian dollar jumped after prices data. Nasdaq 100 Index futures increased 0.7 per cent, as Apple, the biggest stock on the gauge, traded more than 5 per cent above its closing price after reporting record sales and profit. The MSCI Asia Pacific Index lost 0.4 per cent from a four-month high as Japan's Topix index slid. US crude fell for the fourth time in five days.

Singapore joined global policy makers in acting to shield its economy from dwindling inflation, as investors await commentary from the Federal Reserve, which has been meeting in Washington. Australia's core consumer prices rose more than forecast, easing pressure on the central bank to cut interest rates. The after-market gains in Apple and Yahoo, which climbed after announcing a tax-free spinoff of its stake in China's Alibaba Group Holding Ltd, came after the biggest one-day drop in the Dow Jones Industrial Average in three weeks.

"The fact that even the MAS has to ease its hawkish stance signifies the effects of cheaper oil as well as how bad the domestic economy is," Masashi Murata, a currency strategist at Brown Brothers Harriman & Co in Tokyo, said in phone interview, referring to the Monetary Authority of Singapore.

The Singapore dollar dropped to as low as S$1.3569 per greenback, its weakest intraday level since August 2010. In its unscheduled policy statement Wednesday, the MAS, which uses the currency as its main policy tool, said it will reduce the slope of the policy band for the island's dollar. It also cut the inflation forecast for 2015.

The MAS guides the local dollar against a basket of currencies within an undisclosed band and adjusts the pace of appreciation or depreciation by changing the slope, width and center of the band. Singapore's consumer prices fell for a second straight month in December.

The Aussie gained 0.8 per cent to 79.98 US cents, rising for a third straight day, after data showed a measure of underlying inflation rose 0.7 per cent in the fourth quarter from the previous three months, exceeding the 0.5 per cent increase predicted by economists in a Bloomberg survey.

The S&P/ASX 200 Index in Sydney lost 0.2 per cent as the Topix dropped 0.4 per cent, declining from its highest closing level this year. South Korea's Kospi index slipped 0.2 per cent.

BLOOMBERG