Due to economic slump Singapore dollar expected to drop 7.5 percent
According to the Goldman Sachs Group Inc the Singapore dollar is expected to witness a drop of 7.5 percent at S$1.63 against the greenback due to the poor economic condition impelled the central bank to support the feeble currency. Mr. Enoch who is a Hong-Kong based economist said that the bank has discontinued their approximation from S$1.55 and made a modification in their GDP (Gross Domestic Product) growth of 2009 to minus eight percent, which is twice the speed of reduction which were formerly shown.
By moving the policy band lower which is planned to take place in the month of April, there are chances that Monetary Authority of Singapore might deteriorate SGD. Lately the Singapore dollar did a business at S$1.5165 against the American currency. In the current year the city-state’s currency witnessed a downfall of 4.9 percent. It is compared with the ten percent downfall in the Korea won which is amongst the poor performers of the ten of the efficient currencies in Asia but here the yen is not included.
This year the Singapore central bank conducted a survey where the economists made a prediction of downfall of 4.9 percent in the economy compared to the previous forecast of one percent. According to Mr. Idris who is a currency strategist at UBS in Singapore, both HSBC Holdings Plc which is the biggest currency trader in the world and UBS AG were of the view that central bank of Singapore will look for a weak currency at the policy review in the month of April. There are chances that the city’s dollar might fall to S$1.62 in the 3 months and by the end of the year it will bounce back to S$1.59.
According to Mr. Robert who is a Singapore-based senior economist at HSBC, this year the economy of Singapore will contract nine percent and there are probabilities that the central bank will declare a one-off reduction of their small trade-weighted rate of exchange. It is scheduled for April 9 and there are probabilities that it will be in the order of around two percent.
The Ministry of Manpower on March 16 provided with the information that in the fourth quarter of the year 2008 the unemployment rate increased to 2.4 percent from 2.1 percent. Mr. Enoch in his note said that the unemployment rate will increase to seven percent in the year 2010 which will really affect the private spending.
The central bank of Singapore carries out their monetary strategies by directing the dollar within the secret band of trade-weighted currencies of their most important business partners. The central bank of Singapore holds its monetary policy twice in a year. In the month of October 2007 the Monetary Authority of Singapore agreed to a more effective currency appreciation, declared a one-off increase in April 2008 and last year stopped supporting the profits made in the month of October.
Tags: dollar drop, forex market, recession, Slump