Oct 14, 2015

    S$ slips on expectations of MAS easing

    THE Singapore dollar slid yesterday, as the central bank is predicted to ease monetary policy this week with the economy seen having slipped into a recession in the third quarter for the first time since the global financial crisis in the 2008 to 2009 period.

    The Indonesian rupiah and the Malaysian ringgit, commodity currencies in Asia, led losses in regional units after oil prices slumped.

    China's imports fell last month for an 11th consecutive month, indicating the world's second-largest economy is still slumping and hurting exports of its neighbours.

    The Singapore dollar eased 0.2 per cent to 1.4019 per United States dollar as of 2.10pm.

    That came as the Monetary Authority of Singapore (MAS) is expected today to loosen its exchange-rate based monetary policy for the second time this year at its semi-annual review, a Reuters poll showed.

    "(The) market is pricing some form of easing," said Khoon Goh, senior FX strategist for ANZ in Singapore, adding that the bank expects MAS to re-centre the Singdollar nominal effective exchange rate (S$NEER) policy band.

    The central bank manages monetary policy by letting the Singdollar rise or fall against the currencies of its main trading partners within an undisclosed trading band based on its S$NEER.

    Of the 25 analysts surveyed by Reuters, 15 expect MAS to loosen policy.

    Among those who predict an easing, seven expect the slope to be reduced to zero and four see a lower midpoint. Three others expect a slope reduction and re-centring, while one analyst expects a zero slope and band widening.

    "If they just lower the slope to neutral, the rally in USD/SGD will be capped at around 1.4075, which is where I estimate the lower bound is," ANZ's Goh said. "A re-centring will see a much larger rally, possibly towards 1.4150 in the first instance."

    Singapore economy was expected to have shrunk 0.1 per cent in the third quarter from the previous three months on an annualised and seasonally adjusted basis after a 4 per cent contraction, a separate Reuters poll showed.

    That would meet the definition of a technical recession, the first for Singapore since the depths of the financial crisis in 2008 to early 2009, when the economy contracted for four consecutive quarters.

    Most emerging Asian currencies slid as a sharp fall in oil prices triggered profit-taking, especially in commodity currencies.

    The rupiah slumped more than 1 per cent as Jakarta shares lost over 3 per cent. The currency lost ground in non-deliverable forwards markets.

    Expectations for rising dollar demand from Indonesian companies also hurt sentiment on the rupiah.

    The ringgit fell as lower oil prices bolstered concerns over Malaysia's overseas earnings from oil and gas sales. The country is a major exporter of palm oil and natural liquefied gas.

    Oil prices tumbled overnight Monday as traders took profits after last week's surge to an 11-week high, and on a report that Opec continued to boost crude production despite a persistent glut. Crude oil futures edged up on light bargain hunting yesterday.