Net purchases of US$29.9b in MAS forex intervention

[SINGAPORE] Singapore's central bank made its first disclosure of currency intervention data yesterday.

The Monetary Authority of Singapore (MAS) said it made net purchases of foreign exchange worth US$29.9 billion (S$42.6 billion) from intervention operations during the second half of last year.

The six-monthly report was earlier scheduled to come out in July.

However, MAS brought forward the disclosure date to provide more timely information to financial markets amid the coronavirus-induced turmoil.

This move will also align the disclosure with the policy cycle.

MAS made its biannual monetary policy statement last month instead of waiting for its scheduled release this month.

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On March 30, MAS announced it would ease its policy on the Singdollar by setting the currency on a 0 per cent appreciation path at the prevailing lower level of its exchange rate policy band, as Singapore braces itself for its worst recession.

"MAS' disclosure on its foreign exchange intervention operations seeks to enhance the transparency of the actions taken to implement its monetary policy stance, while preserving MAS' operational effectiveness," the bank stated on its website yesterday.

The data comprises MAS' net purchases of foreign exchange from its intervention operations on a six-month aggregated basis, and with a three-month lag from the end of the period, it said.

MAS will release the intervention data on a six-monthly basis, on the first business day of every April and October.

Unlike most central banks that target interest rates, MAS' monetary policy framework is centred on managing the Singapore dollar against an undisclosed trade-weighted basket of currencies.

Last year, the United States' Treasury Department put Singapore on a watch list of major trading partners for their currency practices and macroeconomic policies.

In response, MAS issued a statement last May saying that it does not manipulate its currency for export advantage.

According to MAS, a deliberate weakening of the Singdollar would cause inflation to spike and compromise its price stability objective.

Singapore, in its early years of development, ran persistently large current account deficits.

But that was when its investment needs were greater than available savings.

As the country's economy matured, its investment needs tapered off, while national savings rose.

At present, Singapore runs one of the largest current account surpluses in the world as a share of gross domestic product - estimated at around 18 per cent in 2018.

But this surplus will be reduced going forward, as rising affluence raises consumption while public and private savings are drawn down for the needs of an ageing population.

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