Sing Dollar At Fresh High Against US

Source : The Business Times, April 23, 2008

The Singapore dollar hit a record high against the US dollar on Wednesday and the Malaysian ringgit hit its highest in more than a decade as investors bet on currencies of those Asian countries that seemed determined to fight inflation.

The US dollar was generally lower, with the euro climbing above US$1.6 for the first time since its 1999 inception on Tuesday after comments from European Central Bank Governing Council members Christian Noyer and Yves Mersch suggested the next move in ECB rates would be up.

While the South Korean won, Singapore dollar and ringgit rose, other currencies in the region stayed rangebound.

Analysts warned the calm belied market anxiety.

'The driver (of rising tension) appears to be the continued escalation in global food and energy prices that has broader implications for Asia's fiscal position arising from funding additional subsidies from additional bond issuance,' analysts at JPMorgan said in a note.

Despite the uncertainty, investors placed their bets on the Singapore dollar, which rose 0.3 per cent to 1.3474 per US dollar ahead of inflation data for March later in the day.

Markets expected prices in Singapore rose at an annual pace of 6.8 per cent.

The currency was propped up by expectations the central bank would allow further appreciation to ease inflationary pressures, traders said.

Earlier this month the Monetary Authority of Singapore (MAS) shifted up the centre of the secret trade-weighted band in which it allows the Singapore dollar to move and which it uses to manage monetary policy.

'The US dollar is stil heavy, and the Singapore dollar is below 1.3500 and on the way to 1.3450, though momentum may be slow,' a Singapore-based trader said.

Analysts said investors favoured Asian currencies in countries where central banks aimed to fight inflationary pressures instead of seeking to encourage growth.

The Malaysian ringgit was among those. It rose by 0.3 per cent to 3.1307, hitting its highest since October 1997 for a second consecutive day.

Traders in Kuala Lumpur said they expected the ringgit to end the day at 3.13. March inflation data for the country is due at 0900 GMT on Wednesday.

The South Korean won inched up by 0.3 per cent to 995.7, buoyed by a rise of 1 per cent in stock prices. -- REUTERS