USDSGD blindsiding

Some market players had been blindsided by the MAS' latest monetary guidance released early this morning.

On the back of collapsed exports demand, the market had expected the MAS to devalue the SGD in a more aggresive form, some were even hoping for a path of depreciation of the SGD to help exports (70% of GDP).

However, the MAS' stance was different. Their published statement emphasized their focus on maintaining domestic price stability, and to do that, the SGD is kept at a zero appreciation path and the trading band in which the SGD trades in was re-centred to the current SGD NEER level which they deemed appropriate to keep prices stable.

And as a parting shot at the end of the statement, it says 'there is therefore no undue reason for SGD weakening'.

Upon the news release, USDSGD fell approx 200 pts to 1.4950 from 1.5150 in thirty minutes, clearing all stops along the way.

I got stopped out.

To be fair, the WSJ praised the MAS for taking a more prudent step this time. Even though Singapore's exports have been severely curtailed by the economic crisis, not allowing a sharper depreciation of the keeps investments in Spore more attractive. Afterall, the city state is a fund management hub in S.E. Asia, with USD 800 bn AUM.

Furthermore, competitive devaluation of the currency will not guarantee an increase in exports.

When I have a view on the USDSGD, I'd post something.