Sing dollar at 3-week high as CPI boosts view policy will not change

PHOTO: Sing dollar at 3-week high as CPI boosts view policy will not change

SINGAPORE - The Singapore dollar on Monday hit a near three-week high as faster-than-expected inflation data bolstered expectations that the central bank will keep its tightening bias despite weaker-than-expected exports.

The local currency rose as much as 0.4 per cent to 1.2436 to the US dollar, its strongest since March 6. As of 0631 GMT, the Singapore dollar stood at 1.2440, compared with Friday's close of 1.2482.

It was at 1.2450 before the government said annual consumer inflation in Singapore accelerated to 4.9 per cent in February.

That is higher than January's 3.6 per cent and a market forecast of a 4.1 per cent rise in a Reuters poll.

"The data supports my view that the MAS (Monetary Authority of Singapore) will maintain its current setting for its SGD NEER. This is supportive of the Singapore dollar," said Frances Cheung, senior strategist at Credit Agricole CIB in Hong Kong, referring to the Singapore dollar nominal effective exchange rate.

Cheung expects the Singapore dollar to strengthen to 1.2400 in the second quarter and to 1.2200 by year-end.

Singapore manages monetary policy by letting its dollar rise or fall against the currencies of its main trading partners within an undisclosed trading band.

In October, the MAS maintained its policy of allowing a modest and gradual appreciation of the Singapore dollar with no change to the slope, midpoint and width of the trading band.

The central bank is widely expected to keep the stance in its April meeting, but some investors have seen a chance for an easier policy, given some signs of economic weakness.

Last week, the Singapore dollar was hit by data showing the island's non-oil domestic exports in February plunged 30.6 per cent from a year earlier, much worse than the expected 16.0 per cent drop.

The Singapore dollar, regarded as a safe haven in Asia with triple-A ratings, has lost 1.8 per cent against the greenback this year, according to Thomson Reuters data.