THE key three-month Singapore interbank offered rate (Sibor) jumped 26 per cent on Monday to 0.57762 per cent from last Friday's 0.45738 per cent as the Singapore dollar fell further, dragged down by a tumbling euro.
The sharp movement of the Sibor, used mainly to price home loans, seems to be playing catch-up with another benchmark interest rate, the three-month swap offer rate (SOR), which is typically used for commercial loans.
The three-month SOR at 0.74893 per cent has more than tripled from two months ago. The SOR reflects the Sibor and Sing dollar fluctuations.
The Singapore dollar fell further on Monday to 1.335 from last Friday's 1.328 as the euro tumbled to its lowest in almost nine years.
The euro slid as much as 1.2 per cent after European Central Bank (ECB) president Mario Draghi last week gave his clearest signal the ECB would start quantitative easing, reported Bloomberg. The euro also weakened as Greece began an election campaign that may see victory by an anti-austerity party, it said.
"As euro continues to drop, the SGD will fall further," said Leong Sook Mei, Bank of Tokyo-Mitsubishi UFJ Asean head of global markets research.
The speed of the fall by Singapore dollar and other Asian currencies has been faster than expected, said Ms Leong.
From July 1, 2014, to Jan 5, 2015, the ringgit has fallen 9.3 per cent, the won is down 9 per cent while the Singapore dollar and Taiwan dollar are both down 6.5 per cent. The Indonesian rupiah is down 5.9 per cent.
Ms Leong thinks the Singapore dollar will remain weak in the first half of this year given the euro's woes and the expectations of US interest rate hike, which some say could be in June.
"In tandem with the (expected) US rate hike of June 2015, the dollar will be well bid, and once that story is more fully priced, the market moves to the next story," she said.