Exploring Singapore's Monetary Policy in the Wake of US Dollar's Six-Month High against the Yen
Key Highlights :
The US dollar touched a six-month high against the yen on Tuesday as expectations grew that US rates will remain higher for longer and as the debt ceiling impasse kept risk sentiment fragile. Among a slew of Federal Reserve heavyweights who spoke on Monday, some hinted that the central bank still has more to go in tightening monetary policy, which has caused the greenback to rise to a near six-month peak of 138.80 in early Asia trade.
With the stark contrast between a still-hawkish Fed and an ultra-dovish Bank of Japan, money markets are pricing in a roughly 26% chance that the Fed will deliver another 25-basis-point rate hike next month, compared to a 20% chance a week ago, according to the CME FedWatch tool. Expectations of interest rate cuts later this year have also been scaled back, with rates seen holding at around 4.7% by December.
Similarly, the greenback kept the offshore yuan pinned near its recent five-month low and it last bought 7.0547. China on Monday kept its benchmark lending rates unchanged, as a weakening yuan and widening yield differentials with the United States limited the scope for any substantial monetary easing to shore up the country’s post-COVID economic recovery.
The euro slipped 0.05% to $1.0808 and is down nearly 2% for the month thus far against a stronger dollar, reversing two straight months of gains. Sterling edged 0.02% higher to $1.2440.
In the midst of these developments, Singapore's monetary policy has been of particular interest to investors. As the US dollar continues to remain strong against the Japanese yen, it is likely that the Singapore dollar could remain stable against the greenback. However, it is important to note that the Singapore dollar is also affected by the US-China trade war, as well as other global developments.
The Monetary Authority of Singapore (MAS) has been closely monitoring the situation and has implemented a series of measures to ensure that the Singapore dollar remains stable in the face of global uncertainty. This includes the introduction of the Singapore Dollar Nominal Effective Exchange Rate (S$NEER) policy band in April 2018, which serves as a tool for the monetary authorities to manage the exchange rate of the Singapore dollar against a basket of currencies.
The MAS has also taken steps to ensure that Singapore's economic policies remain supportive of economic growth and job creation. This includes the introduction of targeted fiscal measures such as the Jobs Support Scheme and the Corporate Income Tax Rebate, as well as the introduction of various monetary policies such as the Singapore Savings Bonds and the Singapore Government Securities.
Overall, the US dollar's six-month high against the yen has had a positive impact on Singapore's monetary policy. As the US dollar continues to remain strong, the Singapore dollar is likely to remain stable against the greenback. However, it is important to note that Singapore's monetary policy is also affected by other global developments, including the US-China trade war. As such, the MAS will continue to closely monitor the situation and take necessary measures to ensure that the Singapore dollar remains stable in the face of global uncertainty.
