The Singapore dollar touched an all-time high of 1.2891 against the US dollar on Thursday morning in Asia following the Monetary Authority of Singapore surprisingly decided to tighten its monetary policy by keeping its currency higher at a “slightly” faster pace to curb inflation.
The Monetary Authority of Singapore said the slope of the policy band will be “increased slightly, with no change to the level at which the band is centered,” implying that it will allow a faster appreciation of the Singapore dollar.
Earlier in April, the Monetary Authority of Singapore tightened monetary policy by re-centring the exchange rate policy band upwards and said it would allow a modest and gradual appreciation of the Singapore dollar.
Today’s move came after a Trade Ministry report showed that Singapore’s gross domestic product contracted by a seasonally adjusted 19.8 percent in the third quarter of 2010 compared to the previous three months.
That was below analyst expectations for a 15.7 percent quarterly decline following the revised 27.3 percent surge in the second quarter.
On an annual basis, GDP rose 10.3 percent – slightly below forecasts for a 10.8 percent gain following the 18.8 percent surge in the previous three months.
Singapore consumer prices increased 3.3% year-on-year and 0.5% on month in August. The Central Bank is now forecast the CPI will rise to around 4% by the end of the year.
The Singapore dollar, which has been in an upward channel against the greenback since late August, is currently quoted at 1.2946, up from Wednesday’s New York session closing value of 1.3033.