S'pore, Brunei deny rumors of decoupling<\/p>\n
SINGAPORE (AFP): Singapore and Brunei yesterday denied market
\nrumors of a decoupling between their currencies and affirmed
\ntheir commitment to a one-to-one peg.<\/p>\n
\"The governments of Brunei and Singapore wish to dispel such
\nrumors and state clearly and categorically, that we have no
\nintention of terminating the currency interchangeability
\nagreement,\" a joint statement released here said.<\/p>\n
Speculation that Brunei would decouple its currency was
\ntriggered last month by the oil-rich kingdom's moves to diversify
\nits economy by boosting non-petroleum exports, which would
\nbenefit from a weaker local currency.<\/p>\n
\"These speculations may have caused some feeling of
\nuncertainty in our financial communities or led observers to
\nquestion the good relationship between the Brunei Currency Board
\nand the Board of Commissioners of Currency, Singapore,\" the joint
\nstatement said.<\/p>\n
The currency peg took effect in 1967. Under the
\ninterchangeability agreement, three months' notice is required if
\none of the two parties wants to divorce its currency from the
\nother.<\/p>\n
Currency dealers and analysts confirmed there were rumors of a
\npossible delinking between the currencies but said fundamentals
\nrule out such a drastic move for Brunei, which has no independent
\ncentral monetary authority.<\/p>\n
\"The market was reacting to that (rumor), so I suppose that
\nthe strength of the rumors triggered this press release,\" said an
\nanalyst with British financial consultance I.D.E.A.<\/p>\n
At 3.15 P.M. (0715 GMT), 90 minutes after the joint
\nstatement's release, the Singapore dollar was stronger at 1.4387
\nto the dollar, from an opening quote of 1.4465, but other factors
\nwere at play.<\/p>\n
A foreign exchange dealer with a French bank said the joint
\nstatement \"may have some slight impact\" on the market.<\/p>\n
The Singapore dollar has strengthened against most currencies
\nin recent years. Between 1994 and 1996, it appreciated by almost
\n15 percent to 1.4 against the U.S. dollar, but has depreciated
\nthis year.<\/p>\n
Analysts say that the peg to a robust unit like the Singapore
\ndollar can affect the competitiveness of Brunei's exports, but
\nallows the kingdom to share Singapore's financial stability.<\/p>\n
Sultan Hassanal Bolkiah of Brunei announced last month that he
\nwas allocating 7.2 billion Brunei dollars ($5.14 billion) to
\nfinance the seventh national development plan, aimed at
\ndiversifying Brunei's economic base.<\/p>\n
Oil and gas, which account for more than 95 percent of its
\nexports, have turned Brunei into one of the world's wealthiest
\ncountries.<\/p>\n
But present oil and gas reserves are expected to last for only
\nabout 20 years at current production rates, reinforcing the need
\nto gradually reduce Brunei's dependence on its oil wealth.<\/p>\n
Finance Minister Richard Hu said over the weekend that the
\nSingapore dollar, whose strength has been built on a massive
\ncurrent account surplus, will now appreciate more modestly as
\nglobal inflation slows to tamer levels.<\/p>\n
The rate of the currency's appreciation against the U.S.
\ndollar has slowed from 10 percent in 1994 to 3.3 percent in 1995
\nand one percent last year, ending 1996 at about 1.4 to the
\ngreenback.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/spore-brunei-deny-rumors-of-decoupling-1447893297",
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