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Singapore dollar weakens after MAS easing
THE Singapore dollar slumped noticeably after the country's central bank eased monetary policy to much surprise, as economists said that the stage is now set for a recentring of the local dollar.
The local dollar slid by 0.93 per cent to S$1.3632 against the US dollar at 9.49am Singapore time. This is its biggest fall since November.
The Monetary Authority of Singapore (MAS) said on Thursday morning that it would move to a neutral policy stance of zero per cent appreciation of the S$NEER (Singapore dollar nominal effective exchange rate) band.
It stressed that this was not a depreciation of the currency, and "only removes the modest and gradual appreciation path".
Prior to the half-yearly monetary policy statement, the bulk of economists had expected MAS to leave its monetary policy stance unchanged. Of the 18 economists polled by Bloomberg, 12 expected the central bank to maintain policy on Thursday. The others expect it to ease policy.
"I would think today's move was a surprise if you focused on growth and inflation figures," said ANZ economist Ng Weiwen in a call with The Business Times. "But it might mean that with the weakening of the US dollar and Chinese yuan which are in the S$NEER basket, and Japan moving to negative interest rates, it does seem that MAS moving to a neutral stance is a natural move."
He added that the next step for MAS to ease farther would be the recentring of the policy band.
Economists at Standard Chartered made a similar call, saying: "With the slope now flat, and given that the S$NEER policy band had never been set at a negative slope before, any additional easing may now involve re-centring and/or band widening."
Advance estimates by the government put growth for the first quarter ended March 31 at 1.8 per cent year-on-year, but unchanged on a quarter-on-quarter seasonally-adjusted annualised basis.
MAS said on Thursday that core inflation will rise at a milder pace than earlier anticipated for this year.