SINGAPORE (Oct 10): Singapore’s dollar is set to weaken because the central bank is likely to scrap its appreciation bias at a policy meeting next week, according to a growing group of forecasters.
Mizuho Bank and Societe Generale SA are defying consensus by predicting the Monetary Authority of Singapore will adjust the slope of its nominal-effective-exchange-rate policy band to zero, from 1%, to counter slowing economic growth. Although Singapore’s dollar has already fallen 1.4% this year against the US currency, it is almost unchanged on a nominal-effective basis.
The local currency may “scream its way” to weaker than $1.40 per US dollar if MAS adjusts its bias to zero, said Vishnu Varathan, head of economics and strategy at Mizuho in Singapore. “US-China tariffs escalation, US-EU tensions, political uncertainties and wobbling asset confidence all bearing down suggest that the MAS has cause to remove the slope.”