SGD

[AlphaQuant]

i was curious if there will be a slight recentering or change of slope in response to the rapid decline in the jpy given the substantial weight in the NEER, albeit perhaps offset a touch by the rising RMB - looks like appreciation path to resume although manufacturing continues to be weak.

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SINGAPORE, April 12 (Reuters) - Singapore on Friday held monetary policy steady as expected and said it will maintain the Singapore dollar's "modest and gradual" appreciation path as it expects economic growth to pick up gradually over the course of the year.
The Monetary Authority of Singapore (MAS), however, lowered its inflation forecast for 2013 to 3-4 percent from the previous range of 3.5 to 4.5 percent and cut its outlook for core inflation to 1.5 to 2.5 percent, citing the weaker-than-expected price increases over the past few months.
"MAS will maintain its policy of a modest and gradual appreciation of the Singapore dollar nominal effective exchange rate (S$NEER) policy band," MAS said in its half yearly monetary policy statement.
"There will be no change to the slope and width of the policy band, as well as the level at which it is centred," the central bank added, saying the stance was appropriate for containing inflationary pressures, anchoring inflation expectations, and facilitating the restructuring of the economy.
Singapore manages monetary policy by letting its dollar rise or fall against the currencies of its main trading partners within an undisclosed trading band.
All but one of 15 economists polled by Reuters ahead of the policy statement had expected MAS to retain its policy stance as it prioritises containing inflation over trying to boost an economy that is barely growing.
The exception was Macquarie, which predicted MAS would shift the policy band to a more moderate pace of appreciation.
In its October policy statement last year, MAS defied expectations of an easing in monetary policy by keeping the Singapore dollar on its "modest and gradual appreciation" path with "no change to the slope and width of the policy band as well as the level at which it is centred".

[specuvestor]

yes SGD is likely to weaken near term vs USD, coupled with the weak GDP nos, even as policy remain stable vs NEER.

Singapore is small but a harbinger of global trades. I think this year's global economy is likely to be weaker than expected. ASIAN asset prices should weaken too as low interest rates continues with no additional monetary stimulus as we enter "new normal" and authorities clamp down on hot money.

"Singapore: Advance estimates indicate that in the first quarter of 2013, the Singapore economy contracted by 0.6 per cent compared to the 1.5 per cent growth in the preceding quarter.

On a quarter-on-quarter seasonally-adjusted annualised basis, the economy contracted by 1.4 per cent, down from the 3.3 per cent growth in the previous quarter noted the Trade and Industry Ministry.

Market watchers had expected 1 per cent growth and point out worries in the manufacturing sector."

http://www.channelnewsasia.com/news/busi...36046.html

[a74henry]

MAS policy targets gradual appreciation of the SGD against the USD to combat inflation.

[AlphaQuant]

Deutsche Bank also dismissed the idea of drawing confidence from Monetary Authority of Singapore's (MAS) decision to keep policy unchanged.
"Conditions for easing nearly existed, with growth disappointing, inflation forecasts lowered, and imported inflation negative," said the bank.
It advised FX traders that the risk-reward is firmly in favor of maintaining long USD/SGD and short S$NEER positions.
With S$NEER trading at the top end of the band, the risk-reward is asymmetric. Downside in USD/SGD will be limited by firm intervention at the bands in the near-term, a move higher in the USD complex of Singapore's trade partners in the medium-term, and potentially by the risk of easing down the line," Deutsche Bank said.

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Singapore’s growth depends largely on external demand, which has been weak for a while, affecting exports and production, but the economy’s fundamentals remain strong, thanks to low interest rates supporting thriving domestic demand. If anything, some slowdown in growth is desirable as that could relieve some cost pressure on the economy.
With this backdrop, we don’t expect the authorities to have much desire to support the economy. Interestingly, the thrust of policy measures lately has been in the opposite direction, with the Monetary Authority of Singapore (MAS) steepening the slope on the nominal effective exchange rate (NEER) appreciation last year and a series of macro prudential measures being put in place since 2010 to cool the property market.
As long as interest rates remain at their floor and global liquidity abundant, there will be only limited traction from steps to cool the property market. As cost of financing remains cheap, money will find its way to the property market and associated activities.
The curious characteristic of the Singaporean economy is that it is compelled to maintain a policy of exchange rate appreciation to fight tradable price inflation, which in turn brings in flows and keeps rates low, and consequently fuels non-tradable inflation (e.g. rent and transportation).
The authorities have taken an array of measures to stem the latter, but the impact has been limited so far. We think the MAS will likely maintain an unchanged stance during its policy review later this month (as it would not want to cause a rise in inflation expectations through the tradable channel when non-tradable inflation is so high), and more property cooling measures could well be in the pipeline. But we are not convinced if this policy mix will bring about the desired result. Like it or not, Singapore’s fortunes will continue to remain tied to the vagaries of global macro-economy and developed country monetary policy for years to come.

[specuvestor]

MAS policy targets gradual appreciation of the SGD against the USD to combat inflation.

MAS policy targets gradual appreciation of the SGD against the NEER to combat inflation.

Alphaquant's article gives some indication on how it works but an appreciating SGD against NEER DOES NOT necessarily means cooling the property market. In fact it may not be effective nor their intent.

[AlphaQuant]

most of the non-core inflation is non-tradeable - hence the appreciating SGD theory has very little effect in arresting it.

in fact the appreciating SGD has contributed to 2 problems here:
1) increasing exporters burden (hence manufacturing)
2) free lunch for foreign inflow

look at the 5y bond issue lately at 50bps! a sweet policy that tells the whole world that putting ur money into Sg assets is a free appreciating lunch from FX alone is causing issues.

[specuvestor]

most of the non-core inflation is non-tradeable - hence the appreciating SGD theory has very little effect in arresting it.

in fact the appreciating SGD has contributed to 2 problems here:
1) increasing exporters burden (hence manufacturing)
2) free lunch for foreign inflow

look at the 5y bond issue lately at 50bps! a sweet policy that tells the whole world that putting ur money into Sg assets is a free appreciating lunch from FX alone is causing issues.

That is correct except oil. I posted sometime back that SGD monetary policy is not as simple as finance 101. Econs book are mainly written in countries with flexible exchange rates. Nonetheless our monetary policy since independence has served as well so far and IMHO should not be changed. OTOH HK currency board system has served them well but time to change to RMB instead... But my guess is not until Ackman's options expired

[AlphaQuant]

Singapore's 2013 budget surplus earmarked at $2.4b

That's 0.7% of GDP.
In FY2013, the government is projected to post an overall budget surplus of $2.4 billion, or 0.7% of GDP, said the Monetary Authority of Singapore today.
The basic balance, which is the primary balance less special transfers but without taking into account top-ups to endowment and trust funds, is estimated to be $0.3 billion compared to $3.6 billion in the previous year, largely due to the expected increase in operating expenditure.
Excluding top-ups to endowment and trust funds, the government is projected to disburse $1.3 billion in special transfers, primarily in the form of a one-off GST Voucher Special Payment and CPF Medisave top-ups. Meanwhile, topups to endowment and trust funds are expected to fall to $5.6 billion from $7.4 billion in FY2012.
This is largely due to the Bus Service Enhancement and Special Employment Credit Funds established in February 2012, for which there are no top-ups this year. Instead, the government will add another $3 billion to the GST Voucher Fund and $2.3 billion to other existing funds such as Medifund, ComCare, Edusave, and ElderCare.
Together, these top-ups will strengthen the government’s safety net for the elderly and needy households, and build capacity for long-term investments in social assistance and education.

[specuvestor]

Singapore's 2013 budget surplus earmarked at $2.4b

That's 0.7% of GDP.
In FY2013, the government is projected to post an overall budget surplus of $2.4 billion, or 0.7% of GDP, said the Monetary Authority of Singapore today.
The basic balance, which is the primary balance less special transfers but without taking into account top-ups to endowment and trust funds, is estimated to be $0.3 billion compared to $3.6 billion in the previous year, largely due to the expected increase in operating expenditure.
Excluding top-ups to endowment and trust funds, the government is projected to disburse $1.3 billion in special transfers, primarily in the form of a one-off GST Voucher Special Payment and CPF Medisave top-ups. Meanwhile, topups to endowment and trust funds are expected to fall to $5.6 billion from $7.4 billion in FY2012.
This is largely due to the Bus Service Enhancement and Special Employment Credit Funds established in February 2012, for which there are no top-ups this year. Instead, the government will add another $3 billion to the GST Voucher Fund and $2.3 billion to other existing funds such as Medifund, ComCare, Edusave, and ElderCare.
Together, these top-ups will strengthen the government’s safety net for the elderly and needy households, and build capacity for long-term investments in social assistance and education.

But about 2.8% of budget. You can't "eat" GDP Not big but not insignificant

[AlphaQuant]

Rental market faces roadblocks

Aside from an expected surge in new completions, there are other headwinds that Singapore's residential property market will face in the future, according to Nomura. One of the concerns is higher property taxes due to changes in Budget 2013, like the removal of property tax refunds for vacant properties. Continued tightening of the foreign labour market is also a concern as the minimum salary for foreign PMEs (professionals, managers and executives) to qualify for employment passes will likely be increased.
Moreover, the rental market is expected to face higher mortgage rates, including the potential change in monetary policy by October that could lead to a weaker Singapore dollar and higher benchmark interest rates.