The Monetary Authority of Singapore (Singapore’s central bank) eased its interest rate policy yesterday as the country braced for a recession. By setting the Singapore Dollar’s rate of appreciation at zero percent at the prevailing lower level of its exchange rate policy, the MAS effectively eased. The MAS uses the Singapore Dollar’s nominal effective exchange rate (S$NEER) as its main policy tool as opposed to interest rates. Singapore is a small country and the economy is open with a heavy dependence on trade. The move was widely expected.
While the MAS move was widely expected, it was the first-time that Singapore central bank lowered the band’s centre since 2009 during the global financial crisis. The Singapore Dollar had been appreciating too much too quickly against other Asian and EM currencies much to the dismay of the authorities.
USD/SGD hit a high at 1.4646 a week ago before dropping to 1.4275 yesterday when the announcement was made. USD/SGD initially plunged to 1.4178 from 1.4275 before rebounding to settle at 1.4235 in late New York. Immediate support lies at 1.4200 followed by 1.4170. Immediate resistance can be found at 1.4280 followed by 1.4330. Look for the USD/SGD to grind higher with a likely range today of 1.4225-1.4325.