Source : The Business Times, October 10, 2007
The Singapore dollar hit a fresh 10-year high on Wednesday as investors sold the US dollar after the central bank surprised markets with its tighter policy stance.
The Monetary Authority of Singapore (MAS) in its biannual review said that it would maintain its policy of a 'gradual and modest appreciation' in the Singapore dollar but slightly increase the slope of its trade-weighted band.
The currency rose as high as 1.4625 in early trade, its strongest level since August 1997.
The central bank conducts monetary policy by steering the Singapore dollar in a band against a trade-weighted basket of currencies rather than setting an interest rate as most central banks do.
'We can say it is a tightening of the monetary policy. Inflation pressure is really building up very quickly in the economy,' said Irvin Seah, an economist with DBS Bank.
Traders expect the currency to strengthen further, but they cautioned that the central bank might intervene if the currency rose too fast.
'Initially, there was some selling of the US dollar down to 1.4625, but the 1.4650 level was well supported,' said a trader in Singapore. 'So we are stuck in the range of 1.4650 and 1.4680. I think the 1.4630 level will be a more crucial support (for the US dollar),' she said.
The currency has gained about 2.8 per cent since Sept 18, when the Federal Reserve slashed its key interest rate by 50 basis points and sparked a rally in most Asian currencies. -- REUTERS
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