S’pore central bank says ready to act to curb excessive FX volatility

singaporeSINGAPORE: Singapore’s central bank said on Friday it is ready to curb excessive volatility in the Singapore dollar if necessary, joining regional efforts to guard against capital outflows.

The Monetary Authority of Singapore (MAS) said the Singapore dollar’s nominal effective exchange rate (NEER) remains well within its policy band, notwithstanding increased volatility in international foreign exchange markets over the last few days since Republican Donald Trump won the U.S. presidential election.

“MAS stands ready to curb excessive volatility in the trade-weighted Singapore dollar if needed,” the central bank said in a statement.

The comments came as the Singapore dollar slid to 1.4158 against the US dollar, its weakest since Feb. 4, as a wave of selling hit emerging market assets.

The price move prompted market talk of central bank intervention to limit its depreciation.

The MAS said it does not target any bilateral exchange rate and domestic money markets continue to function normally with ample liquidity in the system.

“While the statement was clear that the MAS does not target any bilateral exchange rate, it was also clear that its duty is to keep the SGD NEER stable within its neutral policy band”, said Philip Wee, senior currency economist at DBS Bank in Singapore.

Wee is also wary of markets getting ahead of themselves over higher U.S. inflation triggered by Trump’s policies, noting that market volatility evaporated as quickly as it started after Britain’s decision in June to leave the European Union.

The Singapore dollar’s downside is seen limited around 1.42 to the greenback, as the top of DBS’ estimated policy band in terms of US dollar/Singapore dollar is around that level, Wee added.

The MAS manages policy by letting the Singapore dollar rise or fall against the currencies of its main trading partners within an undisclosed policy band based on its NEER.

Earlier, Malaysian and Indonesian central banks took measures to stem depreciation in their currencies, while South Korea’s foreign exchange authorities were suspected of intervening to support the won.