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THE Monetary Authority of Singapore (MAS) said on Wednesday the Singapore dollar remains within its policy band, despite "increased volatility in foreign exchange markets following the recent shift in China's exchange rate policy".
The regulator's statement came on the heels of the Chinese central bank's move to cut the yuan's daily reference rate against the US dollar this week. In the ensuing fallout, regional bourses and currencies tumbled on Wednesday, with the Straits Times Index shedding 2.9 per cent and the Singapore dollar hitting a five-year low against the US dollar.
In its statement, MAS said it "does not focus on any specific bilateral exchange rate", but manages the Singapore dollar "against a trade-weighted basket of currencies within a policy band".
"This framework allows the Singapore dollar to adjust to short-term market fluctuations, while providing an anchor against undue volatility in the foreign exchange market," it added.
The regulator also said the monetary policy stance that it announced in April this year "remains appropriate from the perspective of overall macroeconomic conditions".
"MAS stands ready to curb excessive volatility in the trade-weighted Singapore dollar," it said.