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Singapore dollar to continue rising

With inflation within the range of 2-2.5 per cent and a relatively positive economic outlook, analysts expect the Monetary Authority of Singapore (MAS) to keep to its stance of a gradually appreciating Singapore dollar.

SINGAPORE: The Singapore dollar has been gaining ground in recent week, pushing below S$1.25 to the US dollar and hitting eight-month highs.

Currency analysts say they expect the central bank to keep its monetary policy despite expectations of a hike in US interest rates.

For the first three months of this year, the Singapore dollar was mostly trading at between S$1.26 and S$1.28. It has since then been gaining ground.

With inflation within the range of 2-2.5 per cent and a relatively positive economic outlook, analysts expect the Monetary Authority of Singapore (MAS) to keep to its stance of a gradually appreciating Singapore dollar.

"Our take is the Sing dollar would still be pretty much range-bound currency but with a modest weakening bias,” said Sim Moh Siong, FX strategist and director at Bank of Singapore.

“The reason for this is that we are mindful of the risk of high US interest rates later in the year when the Fed could turn a bit more hawkish and this could benefit the US dollar and we could see the US dollar strengthening against the Sing. But at the same time, the reason why its range bound is that the policy bias is likely to continue to favour modest gradual appreciation."

Meanwhile, the Singapore dollar has been holding up against other regional currencies even as some of them experience volatility against the greenback.

"Our neighbouring Southeast Asian currencies, for many of them the dollar range has moved higher. But we have maintained the same range. In fact, if you average the currencies of most of our trading partners, you find we are actually aligned. Most of them have been fluctuating together with the average value of most of our trading partners,” said Philip Wee, senior currency economist and executive director of economy and currency research at DBS Bank.

“Our trade-weighted appreciation really came from us maintaining the stability despite the shocks that we get in the Japanese yen, the Indian rupee and the Indonesian rupiah. So what this tells you is that our currency is aligned… for competitiveness reasons but at the same time we are pretty insulated from global shocks."

Looking ahead to the second half, experts believe the Singapore dollar will continue to hover between the ranges of S$1.20 to S$1.25.

The MAS reviews its monetary policy twice a year, and the next review is due in October.  

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