Singapore: Singapore dollar weakens to over-five-year low
August 25, 2015
On 24 August, the Singapore dollar slumped to an over-five-year low trading at 1.41 SGD per USD. The figure was 2.7% weaker than on the same day of the previous month and 12.7% weaker on an annual basis. The SGD has lost 6.2% of its value since the beginning of the year. The crash of the currency followed the surprise change in China’s foreign exchange policy, as its central bank decided to devalue the tightly controlled yuan, leading to a sharp fall of the Chinese currency. As a consequence, the Singapore dollar, which is among a set of currencies that are widely seen as very sensitive to China’s foreign exchange policy, followed the yuan’s path.
At its latest monetary policy meeting on 15 April, the Monetary Authority of Singapore (MAS) decided to maintain its stance on the “modest and gradual appreciation” of the Singapore dollar nominal effective exchange rate (S$NEER). Despite the recent sharp depreciation against the U.S. dollar, the MAS stated on 12 August that it, “does not focus on any specific bilateral exchange rate” and that 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”. Nevertheless, the MAS added that it, “stands ready to curb excessive volatility in the trade-weighted Singapore dollar”. Its next monetary policy meeting is scheduled for October.
Author: Eric Denis , Economist