(Jan 26): The Singapore dollar climbed to its strongest level since October 2014 versus the greenback amid safe-haven flows, and with the nation’s central bank expected to leave its policy settings unchanged this week.
The Asian currency gained 0.4% to 1.2678 as the US dollar came under renewed pressure on speculation about potential US involvement in Japanese foreign-exchange intervention. The Monetary Authority of Singapore (MAS) is expected to leave its exchange-rate settings unchanged at its meeting on Thursday as core inflation remains steady.
Rather than using interest rates as its main policy tool, the MAS focuses on the currency’s nominal effective exchange rate — referred to as S$NEER — which it allows to move within a policy band.
The Singapore dollar may strengthen “toward the 1.2600 level in the near term” with further downside in the pair contingent on a sustained breakdown in the US dollar, said Lloyd Chan, an FX strategist at MUFG. “MAS will likely keep its current S$NEER policy setting at the January meeting,” he added.
Investors have been attracted to Singapore in recent years for its dividend-heavy stock market, AAA-rated bonds and relatively predictable government policy. The benchmark Straits Times Index is trading at a record high and the local dollar is up about 6% over the last 12 months.
See also: Yen extends gains amid threat of intervention
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