Singapore changes monetary policy, dollar falls to new low<\/p>\n
SINGAPORE (AP): In a surprise move designed to combat a sharp
\nrecession, Singapore's central bank said Thursday it has
\nabandoned its policy of promoting slow appreciation of the
\nisland-state's currency.<\/p>\n
A day after the government said it would announce a package of
\nmeasures within weeks to bolster the economy, the Monetary
\nAuthority of Singapore - the nation's de facto central bank -
\nsurprised the currency market by shifting to a neutral exchange
\nrate policy from a previous tightening stance.<\/p>\n
\"This caught a lot of us by surprise, but they (MAS) had no
\nchoice,\" said Jimmy Koh, head of treasury research at United
\nOverseas Bank Ltd. \"The economy was falling off the cliff.\"<\/p>\n
Julian Jessop, an economist with Standard Chartered Bank, said
\na weaker Singapore dollar could affect foreign exchange markets
\nthroughout the region. However, the move wasn't \"shocking\" given
\nthe bleak economic data issued this week, he said.<\/p>\n
The Singapore government released figures Tuesday that showed
\nthe country had fallen into a recession after two back-to-back
\nquarters of gross domestic product contraction. It also slashed
\nits 2001 economic growth forecast to 0.5 percent to 1.5 percent
\nfrom an earlier forecast of 3.5 percent to 5.5 percent.<\/p>\n
The new exchange rate policy could be a double edged sword for
\nSingapore, promoting its exports by making its products cheaper
\nbut at the same time raising the costs of many imports.<\/p>\n
On Wednesday, the government said that it would announce
\npackage of measures in Parliament - which is due to reconvene on
\nJuly 25 - aimed at cutting business costs and curbing rising
\nunemployment.<\/p>\n
Singapore is a wealthy Southeast Asian nation with no natural
\nresources. It depends on imports for food and most goods, and its
\neconomy relies heavily on the export of electronics.<\/p>\n
The new MAS policy will allow the Singapore dollar to
\nfluctuate within set boundaries, but the bank will \"intervene to
\ncurtail excessive volatility\" and to \"prevent the currency from
\nbreaching the upper or lower bounds when necessary,\" said Tharman
\nShanmugaratnam, MAS managing director.<\/p>\n
\"Against the backdrop of a weaker external economic
\nenvironment and a more protracted global electronics downturn,
\nnear-term growth prospects for the Singapore economy have turned
\nsignificantly weaker while inflationary pressures are subsiding,\"
\nsaid Shanmugaratnam.<\/p>\n
Shanmugaratnam said the fluctuations in the exchange rate will
\nmean that some goods will be more expensive.<\/p>\n
Since January, the central bank had promoted a gradual, modest
\nappreciation of the Singapore dollar on a trade weighted basis.
\nThe policy was aimed at capping medium-term inflationary
\npressures while supporting economic activity as growth began to
\nmoderate.<\/p>\n
Shanmugaratnam said he did not believe the central bank would
\nhave to modify its new policy before the end of the year.<\/p>\n
\"The slowdown reflects a decline in demand, not an erosion of
\ncompetitiveness. There is no reason for any persistent weakening
\nof the Singapore dollar,\" said Shanmugaratnam.<\/p>",
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