The exchange rate-based monetary policy stance adopted by the Monetary Authority of Singapore (MAS) will remain unchanged because there is still leeway for the currency to ease within its current settings in the midst of decelerating economic trends as a result of the Chinese viral outbreak, the central bank stated.
Having experienced the slowest growth in 2019 in over ten years, the country has been warned that its growth might be curtailed this year due to the Coronavirus outbreak.
On Wednesday (5 Feb), MAS announced that its key currency gauge had been hovering near the top of its policy band, thus indicating that there is still capacity to depreciate should the economy tends toward a slowdown. Last year in October, MAS eased the policy for the first time in three years.
MAS responded to media queries that “There is sufficient room within the policy band to accommodate an easing of the Singapore Dollar Nominal Effective Exchange Rate (S$NEER) in line with the weakening of economic conditions as a result of the outbreak of the 2019 novel coronavirus in China and other countries, including Singapore.”
The next policy review will be held later in April as scheduled and economic developments are being monitored closely, MAS added.
Rob Carnell who is the Asia Pacific chief economist at ING, the financial services and multinational banking corporation, noted that “the statement is to curtail speculation that something is about to happen.”
In the midst of the announcement by MAS, the local currency yet hit its weakest against the US dollar since October, 0.8 per cent lower on the day, which also makes the country the top loser of the emerging Asian currencies. This still allows for room to further ease the policy.
The senior currency strategist at Singapore’s biggest financial services group DBS, Philip Wee commented that “There has been some speculation that they (MAS) may ease, but they are telling everyone that they have room not to do anything… But at the same time, at this point, there is no clarity on what the impact (of the coronavirus) may be.”
Singapore was one of the worst-hit nations outside of China during the 2003 Severe Acute Respiratory Syndrome (SARS) epidemic. Since the Coronavirus outbreak, the country has reported 24 cases of infection, which also involved local transmission.
As of Wednesday, almost 500 people died from the viral outbreak in China.