- Joined
- Jan 23, 2010
- Messages
- 1,746
- Points
- 0
Sing$ hits new record high against US dollar
Currency rises over expectations more will be done to fight inflation
By Gabriel Chen, Finance Correspondent
THE Singapore dollar has surged to yet another record high against the US dollar on expectations that the authorities here will do more to fight inflation.
The currency hit $1.2756 to the greenback during trading yesterday after being around $1.28 a week ago. It has gained more than 9 per cent from its level of $1.41 about six months ago.
While it is making life hard for exporters, companies and shoppers that pay for items in US dollars and America-bound tourists are laughing all the way to the bank.
Take Apex-Pal International, which runs the Sakae Sushi restaurant chain. It pays for its seafood products in US dollars, but sells its sushi in Singdollars.
'The exchange rate is to our advantage,' said Apex-Pal International chief executive Douglas Foo.
Then there is paediatrician Koh Poh Kian, who is delighted he will have more to spend when he goes to the United States in May. 'On the one hand, it is positive, but I also have US stocks and funds, so it is a negative for me as well,' he said.
Economists are betting the Singdollar will keep heading north against the US dollar.
Mr Philip Wee, DBS senior currency economist, has tipped it to move towards 1.22 by the end of this year.
Economists point to two key reasons behind the Singdollar's strength.
The first has to do with the increasing economic and political risks among countries globally.
There are still growing concerns that the Chinese economy is overheating after it grew faster than expected at the end of last year.
And the ongoing political tensions in Egypt, which have claimed more than 100 lives over the past week, are taking a toll on investor confidence.
Given these dark clouds, the Singdollar becomes more favoured compared with other Asian currencies, given that it is extremely liquid. The Singdollar is also seen as relatively safer.
'Easy to get in and out,' said Mr Leif Eskesen, chief economist for India and Asean at HSBC. 'In this elevated risk environment, investors who are long in Asia want to be exposed to the Singdollar.'
Inflation is a factor as well, with investors believing that Singapore will intervene to mitigate the growing risks of steeper prices.
Singapore's annual inflation hit 4.6 per cent in December last year - the highest since December 2008.
Analysts say if the rate accelerates further in the first few months of this year, the Monetary Authority of Singapore (MAS) will likely maintain or further tighten its policy in April.
OCBC Bank economist Selena Ling believes MAS will adopt a 'balanced approach' because if it tightens too much, more funds will flow into the country to capitalise on the rising Singdollar.
These capital infusions could fuel asset price inflation.
Asian economies are responding in different ways to the inflation risks. Central banks in Indonesia and the Philippines have held interest rates at historically low levels, even as inflation has picked up.
China, South Korea and Taiwan, by contrast, have started to raise rates and adopt other measures to soak up excess funds.
[email protected]
Currency rises over expectations more will be done to fight inflation
By Gabriel Chen, Finance Correspondent
THE Singapore dollar has surged to yet another record high against the US dollar on expectations that the authorities here will do more to fight inflation.
The currency hit $1.2756 to the greenback during trading yesterday after being around $1.28 a week ago. It has gained more than 9 per cent from its level of $1.41 about six months ago.
While it is making life hard for exporters, companies and shoppers that pay for items in US dollars and America-bound tourists are laughing all the way to the bank.
Take Apex-Pal International, which runs the Sakae Sushi restaurant chain. It pays for its seafood products in US dollars, but sells its sushi in Singdollars.
'The exchange rate is to our advantage,' said Apex-Pal International chief executive Douglas Foo.
Then there is paediatrician Koh Poh Kian, who is delighted he will have more to spend when he goes to the United States in May. 'On the one hand, it is positive, but I also have US stocks and funds, so it is a negative for me as well,' he said.
Economists are betting the Singdollar will keep heading north against the US dollar.
Mr Philip Wee, DBS senior currency economist, has tipped it to move towards 1.22 by the end of this year.
Economists point to two key reasons behind the Singdollar's strength.
The first has to do with the increasing economic and political risks among countries globally.
There are still growing concerns that the Chinese economy is overheating after it grew faster than expected at the end of last year.
And the ongoing political tensions in Egypt, which have claimed more than 100 lives over the past week, are taking a toll on investor confidence.
Given these dark clouds, the Singdollar becomes more favoured compared with other Asian currencies, given that it is extremely liquid. The Singdollar is also seen as relatively safer.
'Easy to get in and out,' said Mr Leif Eskesen, chief economist for India and Asean at HSBC. 'In this elevated risk environment, investors who are long in Asia want to be exposed to the Singdollar.'
Inflation is a factor as well, with investors believing that Singapore will intervene to mitigate the growing risks of steeper prices.
Singapore's annual inflation hit 4.6 per cent in December last year - the highest since December 2008.
Analysts say if the rate accelerates further in the first few months of this year, the Monetary Authority of Singapore (MAS) will likely maintain or further tighten its policy in April.
OCBC Bank economist Selena Ling believes MAS will adopt a 'balanced approach' because if it tightens too much, more funds will flow into the country to capitalise on the rising Singdollar.
These capital infusions could fuel asset price inflation.
Asian economies are responding in different ways to the inflation risks. Central banks in Indonesia and the Philippines have held interest rates at historically low levels, even as inflation has picked up.
China, South Korea and Taiwan, by contrast, have started to raise rates and adopt other measures to soak up excess funds.
[email protected]
