The Singapore dollar is at its worst quarterly performance first time in four years amid speculation that the central bank will be easing monetary policy as soon as next month so as to shore up growth. The currency has tumbled 5.55 against its U.S. counterpart since the end of June both in the wake of unexpected devaluation of the Chinese yuan and the Malaysian ringgit tumbling to the weakest level since 1998.
Both the Chinese yuan and the Malaysian ringgit have similar weightage from which the Monetary Authority of Singapore uses to guide the local dollar against the undisclosed currency basket, according to Australia & New Zealand Banking Group Ltd.The MAS, which reviews its monetary policy twice a year with the next meets in October. Singapore’s currency slid to a six-year low on Tuesday.
“The Singapore dollar was really hit, not only by weakness in the domestic economy, but from weakness in the renminbi and Malaysian ringgit as well,” said a strategist at ANZ in Singapore. “My sense is that the market is probably gravitating towards some form of easing by MAS in the October meeting.”
Against the greenback, the local dollar slid to $1.4335 on Tuesday, the lowest or weakest since September 2009. As it lost 6% as of end September 2011, the performance is deemed to be the weakest after which the MAS eased its monetary policy the following month.
Known to manage the economy by skilfully guiding the currency rather than setting interest rates, the MAS is anticipated to ease its policy next month given the bleak global economic growth outlook and its worsening state since its meeting in April. The Singapore dollar is forecasted to weaken further to $1.455 in three months followed by further slide to $1.495 in a year.
Comment : It may be too early to relax the cooling measures of the property market so as not to encourage foreign investors coming back too soon looking for real estate investment with the local dollar sliding to its record low.