Singapore: The Singapore dollar fell by the most in two months as the US Dollar Index extended a rebound from a record low. The South Korean won declined as investors added to this year’s sales of the nation’s stocks.
Other Asian currencies were also pushed lower as the US dollar rose against the euro and the Japanese yen. The MSCI Asia Pacific index of regional equities declined for the first time in three days as prices of commodities slumped on concern that a slowdown in world economic growth will reduce demand. Indonesia, Malaysia, the Philippines and India were closed for holidays.
Singapore’s dollar headed for its first weekly decline since 8 February on speculation a gain to an all-time high versus the US currency was too fast for the Monetary Authority of Singapore (MAS). The central bank conducts policy through the exchange rate by guiding it within an undisclosed trade-weighted band rather than using interest rates. “The US dollar has recovered against most majors, like the euro and British pound, and this is causing the weaker Singapore dollar,” said Philip Wee, a senior currency economist at DBS, South-East Asia’s biggest bank. “The currency cannot appreciate any further in its trade-weighted basket.”
Singapore’s currency fell 0.6% to S$1.3881 to the US dollar, according to data compiled by Bloomberg. It reached a low of S$1.3915 compared with a record high of S$1.3740 touched on Wednesday.
The Korean won declined 0.1%. The Taiwan dollar rose 0.1% before the presidential election this weekend.
Inflation in Singapore that was the highest since 1982 in January led to speculation MAS was allowing the currency to appreciate faster to reduce import costs and keep prices down in the economy.
Finance minister Tharman Shanmugaratnam said in his annual budget speech last month that “the exchange-rate policy has helped to keep inflation down but there is a limit to how fast the Singapore dollar can appreciate without hurting our economic performance and growth.”
Taiwan’s dollar rose as voters in the island prepared for an election on 22 March to choose a new president.
Korea’s currency declined 7.6% in 2008, the worst performer among the region’s 10 most-active currencies, as overseas fund managers sold shares every day this year except eight. Korea’s main stock index fell as much as 1.8% on Thursday, following a drop in US stocks. The market recovered by the close to end little changed.
“Near-term Korean won and Asian foreign exchange vulnerabilities should again be underscored by the overnight equity sell off and risk appetite retreat,” Singapore-based Claudio Piron, a currency strategist with JPMorgan Chase and Co., wrote in a report released on Thursday.
Korea’s vice-finance minister Choi Joong Kyung said on Wednesday that he doesn’t expect any “drastic” movements in the currency and that the authorities will take preemptive measures if necessary. Thailand’s baht fell, snapping a two-day gain, as the Stock Exchange of Thailand index declined 0.3%. The baht weakened 0.2% to 31.28 per dollar, according to data compiled by Bloomberg.