Singapore Should Resume Currency-Gain Trend, IMF Says
Singapore should return to a policy of allowing the currency to strengthen once the economy recovers from its deepest recession since independence in 1965, the International Monetary Fund said.
“Further along the recovery path, a tightening stance would be warranted to safeguard price stability, through targeting a trend appreciation,” the Washington-based lender said in a statement on its Web site dated yesterday. Singapore’s current monetary policy is “broadly appropriate,” it said.
The Monetary Authority of Singapore, which manages inflation solely through its exchange rate, said in April it would adjust the trading range for the island’s dollar, a move economists say was a de facto devaluation of the currency. The central bank will next review its policy in October, it said in an e-mailed response to questions from Bloomberg today.
“Given that we are at an early phase of the global economic recovery, it makes sense for the MAS to keep its neutral policy until next year’s review,” said Irene Cheung, director of local-markets trading at ABN Amro Bank NV in Singapore. “If things improve, the Singapore dollar can still trade at a stronger level within its currency band instant payday loans.”
The Singapore dollar rose 0.3 percent to S$1.4399 against the U.S. currency at 11:55 a.m. local time, paring yesterday’s loss. It has gained 0.5 percent since the end of June, according to Bloomberg data.
Strong Fundamentals
The IMF, in its report known as an Article IV Consultation, said Singapore’s economic fundamentals remain strong and its financial system can withstand a deeper slowdown.
The island’s gross domestic product may shrink 7.7 percent this year and expand 2.5 percent in 2010, the IMF said. Singapore’s government expects a contraction of 4 percent to 6 percent this year.
“Directors considered monetary policy settings to be broadly appropriate, supporting domestic demand without undermining exchange-rate stability,” the IMF said.
Asia’s economies are experiencing a “policy-led recovery” from the global recession, James McCormack, managing director and head of Asia sovereigns at Fitch Ratings, said at a conference in Singapore today.