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Singapore dollar climbs to fresh 11-year high.
The Singapore dollar climbed to a fresh 11-year high against the US dollar, triggering talk the Monetary Authority of Singapore is intervening to halt the currency's appreciation, analysts said.
At 2.50 pm, the Singapore dollar was trading at 1.3998 against the greenback, compared to 1.4018 late Tuesday. It has touched a high of 1.3993.
The MAS has been tolerating a modest and gradual appreciation of the Singapore dollar to curb imported inflation. A MAS official declined to comment if it had been in the market today.
Analysts believe the currency's rise has been excessive and due largely to the broader weakness of the US dollar.
The greenback fell to its lowest level of 1.5058 against the euro earlier today amid growing pessimism over the health of the US economy.
"A further weakness in the dollar will give a further impetus for the Singapore dollar to appreciate," said Vishnu Varathan, currency analyst at Forecast.
But with the Singapore dollar's nominal effective exchange rate already at the stronger end of the band, Varathan believes MAS will intervene to halt the currency's appreciation. The MAS manages the currency against a basket of trade-weighted currencies.
A stronger Singapore dollar will have a marginal impact in bringing down inflation, which soared to an almost 26-year high of 6.6 percent in January, since inflation is also being fueled by domestic factors such as rising housing prices.
Still, Varathan said he expects the MAS to maintain its current policy of allowing the gradual and modest appreciation of the Singapore dollar when it issues its semi-annual monetary policy statement in April. "There is no basis to loosen the policy given the high inflation. There is also no basis to tighten it given the downside risks for the economy," he said.