On Thursday (10 April), the Monetary Authority of Singapore (MAS) made its first disclosure of currency intervention data.
According to MAS, net purchases of foreign exchange worth USD$29.9 billion (S$42.6 billion) was made from intervention operations in the second half of 2019.
Earlier, the six-monthly report was scheduled to be released in July this year. Despite this, the disclosure date was brought forward by MAS to give more timely information to financial markets during the economic storm caused by the pandemic. By doing this also, MAS can align the policy cycle with the disclosure.
In March, the biannual monetary policy statement was released by MAS as opposed to the originally planned April.
MAS stated on 30 March that it would loosen its policy on the Singdollar. This means setting the currency on a 0 per cent appreciation path at the prevailing lower level of its exchange rate policy band on 30 March in anticipation of a severe recession.
“MAS’ disclosure on its foreign exchange intervention operations seeks to enhance the transparency of the actions taken to implement its monetary policy stance, while preserving MAS’ operational effectiveness,” as stated on MAS’ website on Thursday.
MAS added that the data, which has a three-month lag from the end of the period, consists of the bank’s net purchases of foreign exchange from its intervention operations on a six-month aggregated basis.
The intervention data will be published by MAS on a six-monthly basis, on the first business day of every April and October.
MAS’ approach to monetary policy centres on managing the Singapore dollar against an undisclosed trade-weighted as opposed to the adopted approach by most central banks that is to target interest rates.
In 2019, Singapore has been put on a watch list of major trading partners by the United States’ Treasury Department in accordance with Singapore’s currency practices and macroeconomic policies.
To this, a statement was issued by MAS in May 2019 stating that it does not manipulate Singdollar’s value for export advantage.
A deliberate depreciation of the Singdollar would lead to higher inflation as well as endanger its price stability objective, MAS stressed.
In the early years of the country development, Singapore ran continuous large current account deficits. During this time period, investment needs were higher than the available savings.
Over time, investment needs decreased as the economy matured and national savings increased.
As of now, with a share of gross domestic product (GDP) estimates of about 18 per cent in 2018, Singapore runs one of the biggest current account surpluses in the world.
However, with public and private savings going towards the needs of an ageing population alongside rising wealth propelling higher consumption, both can lead to this surplus decreasing.