Billions of reserves being used to prop up weak SGD

[Gallego99]

No country have reserves solely in USD,,its a basket of currencies and gold reserves as well,,,with USD up, commodities etc will drop,,its all common economic stuff,, and who can predict if usd goes up or down?

It was written on the wall when the FED decided to taper and expectation of a rate hike is supported by 'good' economic data out of the US.

 

[Gallego99]

it should be no mystery nor rocket science for economic masterminds of sg to see the trend and predict outcomes based on u.s. economic indicators. clearly, recovery was in 2010 through 2013, and now we're in the "expansion" phase of the cycle with some years to go before the next downward trend. the sharp decline in 2008 was massive and unprecedented mainly due to bad loans and the housing bust (all self-inflicted due to poor financial and banking policies and policing), but the ensuing recessionary, recovery and expansion phases should not come as a surprise as qe was maintained as an effect of continued deflationary pressure. and then, the tech boom and discovery of shale oil, use of frackng to extract fuel, and the boom in production and self-sufficiency in energy needs. that sped up confidence and economic expansion. sg think tanks should have figured that out in 2014 when i posted about windows of opportunities closing in the emigration folder. it was about real estate in the bay area, but that was disguised as salad dressing for the larger buffet spread. this chart has always been available online.

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'Recovery' will remain anaemic at best and not likely to last. All it takes is a black swan and we'll be back to ground zero all over again.

 

[Gallego99]

The 'prop' is a hedge against inflation. Wild fluctuations in currency is bad for trade. You need to ease it gradually.

 

[eatshitndie]

'Recovery' will remain anaemic at best and not likely to last. All it takes is a black swan and we'll be back to ground zero all over again.

from the data and trends, the recovery phase is already behind us in the u.s.. we're now experiencing the "expansion" phase, at least on both the east coast and west coast.

 

[soIsee]

I think the report means that by keeping the sgd strong, our reserves that are parked in other currency other than USD will depreciate in value. The total depreciation of our reserves in other currencies amounted to US$34billion, leaving the govt no choice but to let the SGD to depreciate against the USD just like most other currencies. We can only maybe conclude that a great proportion of our reserve is not in USD. So buy the wrong horse again.

Not entirely correct.

Instead of just buying the milk, she went to buy the whole COW.

And not only some cows but the whole damn ranch that went with it.

Holy COW!

 

[shiokalingam]

Not entirely correct.

Instead of just buying the milk, she went to buy the whole COW.

And not only some cows but the whole damn ranch that went with it.

Holy COW!

what is the moral of the story ?


buy milk of the shelves at ntuc fairprice ?

 

[Merl Haggard]

US$34bn spent to prop up SGD for six months, that's US$10,000 per citizen gone with the wind.

Too costly to fight the USD, it's simply wasting our reserves, MAS will need to ease again and it looks like they have, USD now back up to 1.392 yesterday, 3-month Sibor rise to 0.907 http://www.abs.org.sg/rates_sibor.php

We could see USD go up to 1.44 SGD and Sibor at around 1.3% within next six months.

Good for my HK$ which I bought in at 0.1728 and now hovering near 0.1800.

 

[soIsee]

what is the moral of the story ?


buy milk of the shelves at ntuc fairprice ?

Moral of the story is ..

Don't ask your wife to buy the milk using YOUR MONEY which she obviously have NO PAINS about spending...

Tell her to use HER OWN MONEY, if she not only wants to buy the milk but also the COW!

HOLY COW! DOES THAT COW COST ONLY $8?

 

[Gallego99]

I'd say breast milk will do. It's the healthier choice.

 

[Gallego99]

Good for my HK$ which I bought in at 0.1728 and now hovering near 0.1800.

I dun expect the strength of the US dollar to hold. Any interest rate hike at this point would likely see a flight of capital across the globe into the US. What we're seeing now are two diametrically opposite forces- a revaluation of the US dollar and on the other a devaluation of the Euro and Yen.

IMHO, the actions taken by MAS to ease Sing dollar is trade bias. Against a demand decline backdrop, methinks its wasteful. Then again, someone has to smoothen out the kinks as any sharp drop in the value of currency could lead to a crisis of confidence reminiscent of the 1997 event.

 

[SgGoneWrong]

I dun expect the strength of the US dollar to hold. Any interest rate hike at this point would likely see a flight of capital across the globe into the US. What we're seeing now are two diametrically opposite forces- a revaluation of the US dollar and on the other a devaluation of the Euro and Yen.

IMHO, the actions taken by MAS to ease Sing dollar is trade bias. Against a demand decline backdrop, methinks its wasteful. Then again, someone has to smoothen out the kinks as any sharp drop in the value of currency could lead to a crisis of confidence reminiscent of the 1997 event.

The ang moh race now is to devalue currency. As ang moh dog, will sg dollar continue to be firm?

 

[krafty]

The MAS has been running down its forward book.
Singapore’s forex reserves are being depleted to keep the SGD afloat. Data from Bank of America Merrill Lynch showed that the country’s FX reserves stood at US$250.7bn in February, down by about US$27bn from the high of US$278bn in June 2014.
“The MAS has been intervening to support the Singapore dollar and running down its forward book quite dramatically, which stood at US$41.8bn in December, versus $68.3bn a year ago and $106.6bn two years back,” the report stated.
BofAML believes that not re-centering the S$NEER band in April would result a further depletion of MAS FX reserves position as the S$NEER continues to test the lower bound.
“The pressure could moreover intensify if the Fed decides to hike interest rates before the next policy meeting in October,” BofAML stated.

https://sg.finance.yahoo.com/news/singapore-forex-reserves-being-depleted-000500581.html

The ang moh race now is to devalue currency. As ang moh dog, will sg dollar continue to be firm?

 

[yellowarse]

I think the report means that by keeping the sgd strong, our reserves that are parked in other currency other than USD will depreciate in value. The total depreciation of our reserves in other currencies amounted to US$34billion, leaving the govt no choice but to let the SGD to depreciate against the USD just like most other currencies. We can only maybe conclude that a great proportion of our reserve is not in USD. So buy the wrong horse again.

You got it wrong. Central banks use 2 means of propping up their currency: buy their currency on the Forex market, or raise interest rates.

The S'pore govt has been propping up the SGD to keep pace with USD. It does this by selling USD from our reserves in exchange for SGD, thereby increasing demand for SGD, raising its exchange rate vis-a-vis the USD. This is done to prevent inflation.

But US$34 bil has already been used. If this continues further we'll be depleting our reserves with drastic consequences. Hence the need to let the SGD devalue slightly, bearing in mind this will increase the money supply and increase the risk of inflation. Also Singapore imports practically everything it needs, not having any natural resources and not being a major manufacturing country, so a weaker SGD will also mean more expensive imports and higher inflation.

 

[Seee3]

You got it wrong. Central banks use 2 means of propping up their currency: sell their currency on the Forex market, or raise interest rates.

The S'pore govt has been propping up the SGD to keep pace with USD. It does this by selling USD from our reserves in exchange for SGD, thereby increasing demand for SGD, raising its exchange rate vis-a-vis the USD. This is done to prevent inflation.

But US$34 bil has already been used. If this continues further we'll be depleting our reserves with drastic consequences. Hence the need to let the SGD devalue slightly, bearing in mind this will increase the money supply and increase the risk of inflation. Also Singapore imports practically everything it needs, not having any natural resources and not being a major manufacturing country, so a weaker SGD will also mean more expensive imports and higher inflation.

Thank you for the explanation.