Backing Down on The SGD – MAS Inflation Outlook

I wrote Trading Against A Black Box – USDSGD last year.
MAS published Monetary Policy Operations In Singapore back in March this year in an effort to explain themselves to the public and not in response to me, of course.

Yesterday on AsiaOne.

“SINGAPORE – Singapore’s central bank posted a $10.61 billion net loss in its last fiscal year as the local dollar’s gains against the yen and euro diminished the value of its foreign currency holdings.”

And this yesterday.

Singapore Central Bank Cuts 2013 Inflation Forecast to 2%-3%

  • Core inflation forecast remains 1.5%-2.5%: Menon
  • Current monetary policy stance appropriate in containing any re-emergence of strong cost and price pressures as economy undergoes restructuring: Menon
  • MAS to ensure recent inflation improvements sustained: Menon
  • “Our tight stance since 2010 is paying off. Inflation has come down to within our comfort zone but there’s no room for complacency. Wage and cost pressures will persist and bear close watching” : Menon
  • Core inflation could rise “moderately” in 2H, while overall inflation will ease amid lower rents and car costs: annual report
  • Asset market inflation, especially housing, remains important focus: annual report
  • NOTE: Singapore stuck to a policy of allowing gradual gains in its currency at April review


  • MAS reiterates 2013 inflation forecast of 3%-4%
  • Economy expected to have more decisive pick-up toward 2H, MAS says
  • NOTE: MAS in April maintained policy of allowing gradual gains in currency to contain inflationary pressures
  • NOTE: Economy grew 1.8% Q/q in 1Q
  • NOTE: Inflation rate was 1.5% in April

(Source : Bloomberg 11 Jun 2013)

And all the yapping economists who got it wrong in Feb came out immediately after our glorious GDP to say the right thing.

July 17 (Bloomberg) — Investors should bet on gains in
Singapore’s dollar as island’s policy makers will tolerate
appreciation to curb price pressures, according to Credit Suisse
Private Banking and Wealth Management.

July 15 (Bloomberg) — UBS raises Singapore’s 2013 GDP
growth forecast to 3.0% from 2.5% previously, and expects MAS to
maintain its existing policy settings in October, according to
• Resilience of Singapore’s economy has reinforced UBS’ view for SGD to rise toward 1.2200 vs USD over 12 months

They were played out by the revision in CPI !  yet the core CPI may still be on their side.

Like I said in April after the MPS, the next one is the important one. Singapore is rising up to the occasion under global pressure to tackle a potential inflationary-recession in an increasingly difficult to manage financial market, as I would put it. Zerohedge’s article highlighted that “22 fixed income firms that have been fined and 7 that have been restricted for failure to comply with anti-money-laundering and terrorism-financing rules. The MAS suggested firms ‘improve’ their screening of customer names and sources of wealth in order to prevent the financial system from being used to harbor or act as conduit for illegal funds.” Source :

The financial market has already been rocked by fixing scandals that has so far not affected our nearest competitor, Hong Kong where the Chicago MBA school will be moving to.

I still stand by my view we will see 1.30 and then 1.35 in the USDSGD as Singapore reinvents herself to face up to the new challenges that the Fed taper will bring. Their monetary operations will allow them to keep a higher USDSGD (because inflation has eased off) and onshore liquidity to tighten because “it important to act now to limit build-up of leverage”.

 Ravi Menon, Managing Director of the Monetary Authority of Singapore (MAS), said that 5 to 10% of borrowers “have probably over-leveraged their property purchases”.”

China is showing the world that it is ok to fall sick. Singapore will have to do the right thing.