Singapore’s central bank spent an estimated US$17 billion ($22.2 billion) buying foreign currencies in October as capital inflows rose at the fastest pace since March 2008, according to DBS Group Holdings.

The island is attracting more capital than other economies in Asia because its interest rates are probably “too high given the currency regime in place,” David Carbon, head of economic and currency research at DBS Bank in Singapore, wrote in a report yesterday. The Monetary Authority of Singapore spent about US$8.2 billion in spot-market intervention and US$8.6 billion in forward-market intervention, he said.

The Monetary Authority of Singapore said in October it will steepen and widen the currency’s trading band while continuing to seek a “modest and gradual appreciation,” after undertaking a one-time revaluation in April. The central bank, which uses its currency rather than a benchmark interest rate as its main tool to manage inflation, guides the Singapore dollar against a basket of currencies within an undisclosed band.

“Singapore is butting heads with the impossible trinity,” Carbon said, referring to the theory that no country can have an open capital account, a fixed or closely limited exchange rate, and control over interest rates at the same time. “The currency is being controlled as the key tool in conducting monetary policy. But interest rates are too high given this currency regime.”

Singapore’s central bank said it doesn’t comment on specific market operations when Bloomberg News sought a comment on the DBS report.