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Singapore's dollar holds at eleven-year high as inflation quickens

Singapore's dollar holds at eleven-year high as inflation quickens

The Singapore dollar held at an 11-year high after a government report showed inflation quickened by the most in a quarter century in January, backing the case for the central bank to let the currency rise at a faster pace.
The city-state's dollar gained for a fourth day against the U.S. dollar on prospects the Monetary Authority of Singapore will keep in April its policy of a "gradual and modest" appreciation and a slight increase in the slope of the band within which the MAS guides the currency. The island uses the exchange rate instead of interest rates to control monetary policy.
"The data may spur the central bank to allow a stronger currency," said Tsutomu Soma, a bond and foreign-exchange dealer at Okasan Securities Co. in Tokyo. "The Singapore dollar is likely to strengthen."
The Singapore dollar rose as high as 1.4048 Singapore dollars, the strongest since February 1997, before trading at 1.4059 dollars as of 4:07 p.m. local time yesterday, from 1.4061 dollars late in Asia on February 22. The currency has gained 1.2 percent over the past month. It may advance to 1.4000 dollars yesterday, Soma forecast.
Singapore's currency extended this month's gain to 0.8 percent after the Department of Statistics today said prices jumped 6.6 percent last month from a year earlier, the most since 1982. The median estimate in a Bloomberg News survey of 16 economists was for a 5.6 percent increase.
Allowing the currency to appreciate reduces the cost of imports and helps lower consumer prices. Singapore's dollar may rise to 1.3800 dollars by the end of the year, a separate survey shows.
The Singapore dollar's advance may be limited by speculation the central bank will sell the currency to prevent excessive gains from crimping growth. A stronger currency makes local goods and services more expensive to customers abroad.
"On a trade-weighted basis, we see limited upside in the Singapore dollar," said Craig Chan, currency strategist at Lehman Brothers Holdings Inc. in Singapore. "There's a focus not just on inflation but a focus also increasingly on growth."
Finance Minister Tharman Shanmugaratnam said on February 15 that "there is a limit to how fast the Singapore dollar can appreciate without hurting our economic performance and growth, and eventually causing wages to fall."
The trade ministry on February 14 lowered the maximum gross domestic product growth forecast for this year to 6 percent from 6.5 percent previously.


Updated : 2021-08-01 10:15 GMT+08:00