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SINGAPORE: The Singapore dollar has been losing ground against the US dollar, dropping to its lowest in six months at 1.4255 earlier this week. But it has managed to pull back a little, closing Friday's trade at about 1.4185.
The Singapore currency had seen a period of sustained strengthening against the greenback since the beginning of the year, and analysts said the latest weakening could mean some respite for manufacturers.
While some may breathe a sigh of relief now, market watchers are warning that this is not a sign of a strengthening US economy.
Vishnu Varathan, regional economist, Forecast Singapore, said: "What has happened, I think, is that the US dollar has been discounted way too much, so a lot of positions went into alternative currencies like the Euro, the Aussie, and the Asian currencies. So all Asian currencies appreciated rapidly against the greenback, but that trend has reversed out."
Still, there has been talk that with inflation showing signs of easing from a 26-year high, Singapore's central bank may now turn its focus on helping to spur economic growth.
Song Seng Wun, regional economist, CIMB, said: "At this juncture, food inflation has stabilised somewhat and fuel inflation has been more subdued. If we want to move that forward, in the case of Singapore - where we had the impact of higher GST into the second half of 2007 - the year-on-year figures should lead to a moderation in CPI."
The Monetary Authority of Singapore (MAS) has maintained a policy of gradual appreciation of the Singapore dollar, and is due to review its policy in October.
- CNA/so
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