Sing$ At 11-Year Highs

Source : The Business Times, January 29, 2008

The Singapore dollar rose to 11-year highs against the US dollar on Tuesday while traders bet on another US interest rate cut this week to try to ward off a US recession, dealers said.

The dollar was at 1.4195 against the greenback, down slightly from 1.4187 earlier, and against 1.4244 on Monday.

'The local currency is stronger because of the falling US dollar,' said Joseph Tan, a strategist at Fortis Bank.

The greenback came under pressure after the US Commerce Department on Monday said that sales of new homes across the United States fell 4.7 per cent in December from the prior month.

Property sales across the US declined last year and banks revealed hefty losses tied to ailing mortgage investments, leading to widespread fears for the US economy.

Mr Tan said the Monetary Authority of Singapore (MAS) - the republic's de facto central bank - also wants to tolerate a stronger Singapore dollar to hedge against rising inflation.

'We are not in any danger of intervention from the MAS at this stage,' he said.

The MAS conducts monetary policy through the local currency rather than by setting interest rates.

The Singapore dollar is traded against a basket of currencies of the city's major trading partners within an undisclosed trading band known as the nominal effective exchange rate (Neer).

Details of the trading band are not made public to prevent speculation in the Singapore dollar.

Most analysts expect the US Federal Reserve, the US central bank, to trim at least another quarter point off its key federal funds interest rate when it meets on Tuesday and Wednesday.

The rate is currently 3.50 per cent after the Fed slashed it by 0.75 percentage points in an emergency move aimed at calming global financial markets roiled by fears of a widening US recession. -- AFP