KINIBIZ Observers of the Singapore dollar-ringgit movements would have noticed that the Singapore dollar has been gradually appreciating against the ringgit over the past year. However, it was last Monday’s high of 2.8 to the ringgit that had the market abuzz with excitement.

Manu Bhaskaran, chief executive officer of Centennial Asia Advisors Pte Ltd, an independent research and advisory firm based in Singapore, says that it is not so much the Singapore dollar appreciating as the ringgit depreciating.

“The Monetary Authority of Singapore) has moderated the pace of the Singapore dollar appreciation against a basket of trading partners’ currencies since January this year in line with low inflation and rising risks to growth in Singapore.

“Our view is that inflation will turn out lower than policy makers assume and that the risks to growth will be higher. In that context, our best guess is that the MAS will have to further moderate its exchange rate-based policy in October, perhaps shifting to a policy of no appreciation of the Singapore dollar in trade weighted terms,” Manu told KINIBIZ via e-mail.

It is worth remembering in light of the above, that the MAS has a unique monetary policy when it comes to handling the Singapore dollar. Essentially, what it does is allow the Singapore dollar to appreciate or depreciate within a certain band, against a basket of weighted currencies. Therefore the MAS prefers to allow the currency to appreciate.

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