MAS eases Singaporean dollar policy to boost investment

MAS eases Singaporean dollar policy to boost investment

SINGAPORE (Reuters): Singapore's central bank on Wednesday announced moves aimed at increasing foreign investment that eased but did not lift its "non-internationalization" policy on the local dollar.

The Monetary Authority of Singapore (MAS) said banks could now make transactions in Singapore dollar currency options with other banks and financial institutions in Singapore that are subject to central bank regulation.

The move was intended to facilitate the use of currency options as hedging instruments.

Banks can now also lend Singapore dollars to non-residents for investment in the city state, while non-residents can obtain Singapore dollar credit to fund offshore activities as long as the proceeds are swapped into a foreign currency.

"In the past, MAS has sought to limit participation in the S$ markets by foreign investors in order to minimize volatility in the S$ exchange rate," MAS managing director Koh Yong Guan said in a statement.

"As S$ capital markets have deepened and developed over the last few years, this is no longer a policy objective. With the latest revisions...the primary objectives of the S$ policy are to limit borrowing of S$ by non-residents for currency speculation and to discourage the development of an offshore S$ market."

The central bank said the moves would not alter MAS control over the local dollar but were intended to allow greater participation by international investors and financial institutions in Singapore's capital markets.

The MAS said the move would help broaden the investor base for Singapore dollar assets as non-residents could now obtain Singapore dollar funding for investment in Singapore dollar equities, bonds and real estate.

The Singapore dollar was trading at 1.7395/05 per U.S. dollar on Wednesday afternoon, relatively steady since the MAS announcement.