Sing dollar still within policy band: MAS

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Despite sinking to a five-year low against the US dollar, the Monetary Authority of Singapore (MAS) said on Wednesday that the trade-weighted Singapore dollar has stayed within its policy band amid market volatility.

The local dollar sunk to a new low against its US counterpart at S$1.415 per US dollar on Wednesday, as traders continue to react to the recent shift in China’s exchange rate policy.

According to the central bank, “MAS manages the Singapore dollar against a trade-weighted basket of currencies within a policy band, and does not focus on any specific bilateral exchange rate,” allowing the Singapore dollar to “adjust to short-term market fluctuations, while providing an anchor against undue volatility in the foreign exchange market.”

MAS added that the monetary policy it introduced in April this year “remains appropriate” from the perspective of overall macroeconomic conditions, and that it is ready to curb excessive volatility in the trade-weighted Singapore dollar.

Meanwhile, the Singapore interbank offered rate (SIBOR) rose 5.5 basis points, its biggest one-day rise since early January, from 0.8791 percent to 0.9345 percent.

SIBOR is the rate at which banks loan from one another, and is also the rate at which most home loans are pegged at. An increase in the SIBOR reflects tighter domestic money market conditions and weakness in the Singapore dollar. Weakness of the local currency versus its foreign counterparts can put upward pressure on local interest rates as investors seek more incentive to hold on to the local currency.

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