The Monetary Authority of Singapore will probably slow the pace of appreciation in the local dollar as moderating price pressures provide scope for measures to support economic growth, according to a survey of analysts.
Officials will curb gains in Singaporeâ€™s currency when they meet Oct. 12 by decreasing the slope of its trading band, according to 17 of 23 financial companies surveyed by Bloomberg News. Two said thereâ€™s a chance the MAS will widen the band in addition to reducing its slope. Five predict no change, while one projected a shift to a zero slope, the poll showed.
Recent data have shown bigger-than-forecast declines in manufacturing and exports, leading economists and investors to flag the risk of a technical recession. Singapore cut its 2012 growth forecast in August, and a report last month indicated the slowest pace of inflation in almost two years. That means the MAS has room to spur the economy by stemming gains in the exchange rate, its main policy tool, according to analysts.
â€œThe Singaporean economy has largely underperformed the MASâ€™s expectations,â€ Frances Cheung, a Hong-Kong based strategist at Credit Agricole CIB, wrote in an e-mail Oct. 3. â€œThe balance of risk has clearly shifted from inflation to growth.â€ Cheung predicted the MAS will announce a reduction to the Singapore dollarâ€™s trading band slope.
Singaporeâ€™s central bank uses the exchange rate rather than borrowing costs to conduct monetary policy, adjusting the pace of appreciation or depreciation against an undisclosed trade- weighted band of currencies by changing the slope, width and center of the band. A flatter slope allows slower appreciation or depreciation over time.
Via – Bloomberg