Friday 29 Mar 2024
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KUALA LUMPUR (Oct 14): The ringgit weakened against the Singapore dollar (SGD) to a new record exchange rate of 3.3025 on Friday (Oct 14), after Singapore tightened its monetary policy in the morning to fight inflation.

The ringgit had pared losses when it closed at 3.3025, as it traded between 3.2831 and 3.3095 intraday. This is the third consecutive day the ringgit closed at record level lows, after 3.2738 on Thursday and 3.2609 on Wednesday. 

Year-to-date, the SGD has strengthened against the ringgit by 7.03%. It closed at 3.0857 on Dec 31, 2021. 

Meanwhile, the ringgit further weakened against the US dollar (USD) at 4.7045 on Friday, a whisker away from its lowest point. At the close of Thursday, the ringgit was trading at 4.6925 against the USD.

The last time the currency pair hit above 4.7 was during the Asian Financial Crisis on Sept 1, 1998, where the ringgit stood at 4.7125. Over the period of one year, the ringgit has depreciated 12.91% against the greenback.

In a statement on Friday, the Monetary Authority of Singapore (MAS) said it will re-centre the mid-point of the SGD nominal effective exchange rate (S$NEER) policy band up to its prevailing level, but keep the slope and width of the band unchanged.

Unlike other countries’ central banks, which adjust their respective interest rates as part of their monetary policies to support economic growth and curb inflation, the MAS’s monetary policy involves adjustments to the S$NEER policy band.

Year-to-date, MAS has increased the slope of the policy band twice on Jan 25 and April 14. Friday marked MAS’s third move, after April 14 and July 14, to re-centre upwards the policy band at prevailing levels of the S$NEER.

UOB Group Research said on Friday in a note that it sees further room for tightening into 2023, especially if core inflation does not show signs of moderation.

Meanwhile, DBS Group Research released a note in which senior foreign-exchanged strategist Philip Wee stated that MAS will become more data-dependent in future policy decisions. 

“According to our model, the S$NEER is around 0.9% above its mid-point at the time of writing. This is a sweet spot for market participants worried about rising inflation and weaker global growth prospects. 

“In USD/SGD terms, the stronger half of the S$NEER policy band is estimated to be between 1.4090 and 1.4370,” they said. 

At the time of writing, the SGD gained against the USD at 1.4246, after it closed at 1.4307 on Thursday. 

Edited ByEsther Lee
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