China’s decision to allow greater flexibility in its currency won’t affect Singapore’s exchange- rate policy, the Southeast Asian nation’s central bank said.

The People’s Bank of China on June 19 indicated it’s abandoning the 6.83 yuan peg to the dollar adopted during the global crisis to shield exporters. The central bank said while there’s no basis for “large scale” moves in the currency, the exchange rate will be allowed increased “flexibility.”

 

The “announcement will not have an impact on Singapore’s exchange-rate regime,” the Monetary Authority of Singapore said in an e-mailed statement today. “The policy of a modest and gradual appreciation” of the island’s currency announced on April 14 “remains unchanged and is appropriate against underlying economic conditions,” it said.

 

Singapore, which manages the local dollar against a weighted basket of currencies of the island’s major trading partners, said in April it would undertake a one-time revaluation and seek a gradual appreciation of the currency as the nation rebounded from last year’s global slump. The central bank said today it will monitor the impact of overseas developments on the economy.

 

The policy of managing the Singapore dollar against a group of currencies “allows us to accommodate the changes within the existing framework of our exchange-rate system,” the Monetary Authority said, adding that it “will continue to be vigilant over developments in the external environment and their impact on the domestic economy, and stands ready to curb excessive volatility” in the Singapore dollar.

 

Chinese authorities will resume a managed float of the yuan, also known as the renminbi, against a basket of currencies, according to the June 19 statement. Before the exchange rate was frozen in July 2008, Premier Wen Jiabao’s government had allowed a 21% advance versus the dollar over three years.