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SGD up 1% following unexpected mild easing move by MAS
THE Singapore dollar (SGD) rose one per cent on Wednesday following a mild easing move by the Monetary Authority of Singapore (MAS).
But the rally is expected to be short lived, said many analysts.
At 4pm, the SGD stood at S$1.3872 to the US dollar, a change of S$0.014 from S$1.4011 on Tuesday.
The gain is partly due to expectations of the market not met for more easing, said Euben Paracuelles, Nomura economist. He said that other currencies in Asia has also rallied, such as the Thai baht gaining 0.5 per cent and the Indian rupee up 0.2 per cent.
"It was a mini easing," he said, and it's the first time the MAS has done so.
Although there wasn't consensus on what form the easing would take, most analysts had expected a one per cent move.
"We estimate this to be a 0.5 per cent pa reduction, from the estimated one per cent pa slope," said Francis Tan from United Overseas Bank.
In the morning, the MAS lowered the S$NEER (Singapore dollar nominal effective exchange rate) slope "slightly".
But with expectations that the US will still hike interest rates before too long and continued economic uncertainties, the SGD strength is likely temporary.
"Taking into account today's policy action and our expectations that the US interest rate normalisation to start in December, we maintain our forecast of the USD/SGD to end 2015 at 1.43, and further climbing to 1.45 by the end of Q1 2016," said Mr Tan.