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<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0><TBODY><TR>Sing dollar slides again
</TR><!-- headline one : end --><TR>Currency suffers biggest dip in 2 weeks against greenback on back of local export concerns </TR><!-- Author --><TR><TD class="padlrt8 georgia11 darkgrey bold" colSpan=2>By Robin Chan
</TD></TR><!-- show image if available --><TR vAlign=bottom><TD width=330>
</TD><TD width=10>
</TD></TR></TBODY></TABLE>
<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->THE Singapore dollar has suffered its biggest fall in two weeks as economic slowdown fears continue to overtake inflation concerns.
The local currency fell 0.73 per cent to 1.4185 to the US dollar as new data showed that inflation here had eased from 26-year highs.
The onslaught on the Sing dollar also came as bearish comments were made by Singapore's Trade and Industry minister, Mr Lim Hng Kiang, in Parliament yesterday. He warned that a strong Sing dollar could hurt exports which are already floundering.
Economists are expecting the Sing dollar to continue to weaken and they say it may fall to $1.45 to the dollar in a year from now.
The Monetary Authority of Singapore (MAS) has been maintaining a strong Sing dollar policy in order to battle inflation because a stronger local currency makes imports cheaper, which eases the upward pressure on prices. However, this stance has tended to hurt the nation's manufacturers as exports become less competitive. Local exports have contracted quite sharply for three straight months, partly due to a global slowdown in demand.
At the same time, new inflation figures released yesterday suggest that the threat of skyrocketing prices may finally be moderating. Year-on-year inflation came down from 7.5 per cent in June to 6.5 per cent in July.
Mr Lim told Parliament: 'We recognise that a strengthening Singapore dollar could have some restraining effect on exports in the short term.
'There is therefore a limit to how strongly the Singapore dollar can appreciate to offset the effects of global inflation passing through to the Singapore economy.'
Yesterday's fall was a further weakening of the Sing dollar that began soon after it hit a high of $1.35 to the dollar on July 15.
Standard Chartered currency strategist Callum Henderson said this trend indicates a broad rebound by the US dollar as global investors are realising that the economic slowdown is not confined to the US.
As a result, they are turning their attention from the US dollar to other major currencies such as the euro and the yen. Inflation fears are also being eased by moderating oil and commodity prices.
The US dollar had previously been taking a beating as economic woes, including the sub-prime mortgage crisis which began a year ago, spurred investors to sell US dollars.
Citigroup economist Kit Wei Zheng said that 'people are realising that Singapore is vulnerable to a slowdown and that it is not just US centric but global'. He added: 'The weakening of the Sing dollar reflects the fact that the currency has been too strong. It has fought inflation well, but has hurt on the growth front.'
Economists expect the Sing dollar to continue to weaken into the next year. Standard Chartered and OCBC forecast that the Sing dollar will hit $1.45 against the dollar by the middle of next year.
OCBC economist Selena Ling said that the Sing dollar is expected to hit the $1.4150 mark by December and $1.4350 by March next year.
Whether this will force the MAS to shift its monetary policy is still uncertain.
Ms Ling said that barring further slowing, the central bank 'will be hard pressed to loosen its monetary policy now' as 'there is still room for the Sing dollar to fluctuate at the lower end of the band'.
Mr Kit said: 'While the odds of the MAS easing policy in October have risen given the downside risks to growth, this is not yet a forgone conclusion.'
Goldman Sachs economists Mark Tan and Michael Buchanan said that 'due to persistent inflaton fears', MAS is unlikely to change policy when it meets again in October, but that 'they could possibly look to ease the pace of the appreciation of the Sing dollar next April'.
HSBC's Robert Prior-Wandesford said that 'with underlying cost pressures still very much in evidence', it will be difficult for the MAS to 'take its foot off the brakes'. [email protected]
</TR><!-- headline one : end --><TR>Currency suffers biggest dip in 2 weeks against greenback on back of local export concerns </TR><!-- Author --><TR><TD class="padlrt8 georgia11 darkgrey bold" colSpan=2>By Robin Chan
</TD></TR><!-- show image if available --><TR vAlign=bottom><TD width=330>
</TD><TD width=10>
<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->THE Singapore dollar has suffered its biggest fall in two weeks as economic slowdown fears continue to overtake inflation concerns.
The local currency fell 0.73 per cent to 1.4185 to the US dollar as new data showed that inflation here had eased from 26-year highs.
The onslaught on the Sing dollar also came as bearish comments were made by Singapore's Trade and Industry minister, Mr Lim Hng Kiang, in Parliament yesterday. He warned that a strong Sing dollar could hurt exports which are already floundering.
Economists are expecting the Sing dollar to continue to weaken and they say it may fall to $1.45 to the dollar in a year from now.
The Monetary Authority of Singapore (MAS) has been maintaining a strong Sing dollar policy in order to battle inflation because a stronger local currency makes imports cheaper, which eases the upward pressure on prices. However, this stance has tended to hurt the nation's manufacturers as exports become less competitive. Local exports have contracted quite sharply for three straight months, partly due to a global slowdown in demand.
At the same time, new inflation figures released yesterday suggest that the threat of skyrocketing prices may finally be moderating. Year-on-year inflation came down from 7.5 per cent in June to 6.5 per cent in July.
Mr Lim told Parliament: 'We recognise that a strengthening Singapore dollar could have some restraining effect on exports in the short term.
'There is therefore a limit to how strongly the Singapore dollar can appreciate to offset the effects of global inflation passing through to the Singapore economy.'
Yesterday's fall was a further weakening of the Sing dollar that began soon after it hit a high of $1.35 to the dollar on July 15.
Standard Chartered currency strategist Callum Henderson said this trend indicates a broad rebound by the US dollar as global investors are realising that the economic slowdown is not confined to the US.
As a result, they are turning their attention from the US dollar to other major currencies such as the euro and the yen. Inflation fears are also being eased by moderating oil and commodity prices.
The US dollar had previously been taking a beating as economic woes, including the sub-prime mortgage crisis which began a year ago, spurred investors to sell US dollars.
Citigroup economist Kit Wei Zheng said that 'people are realising that Singapore is vulnerable to a slowdown and that it is not just US centric but global'. He added: 'The weakening of the Sing dollar reflects the fact that the currency has been too strong. It has fought inflation well, but has hurt on the growth front.'
Economists expect the Sing dollar to continue to weaken into the next year. Standard Chartered and OCBC forecast that the Sing dollar will hit $1.45 against the dollar by the middle of next year.
OCBC economist Selena Ling said that the Sing dollar is expected to hit the $1.4150 mark by December and $1.4350 by March next year.
Whether this will force the MAS to shift its monetary policy is still uncertain.
Ms Ling said that barring further slowing, the central bank 'will be hard pressed to loosen its monetary policy now' as 'there is still room for the Sing dollar to fluctuate at the lower end of the band'.
Mr Kit said: 'While the odds of the MAS easing policy in October have risen given the downside risks to growth, this is not yet a forgone conclusion.'
Goldman Sachs economists Mark Tan and Michael Buchanan said that 'due to persistent inflaton fears', MAS is unlikely to change policy when it meets again in October, but that 'they could possibly look to ease the pace of the appreciation of the Sing dollar next April'.
HSBC's Robert Prior-Wandesford said that 'with underlying cost pressures still very much in evidence', it will be difficult for the MAS to 'take its foot off the brakes'. [email protected]
