Is ANYONE going to defend their currency? Chuck Butler writes in the Daily Pfennig that Singapore is now the latest to throw in the towel on theirs:
A couple of weeks ago, when Chris was writing the Pfennig for me, he wrote about Singapore, and how the Monetary Authority of Singapore (MAS) had indicated it might push the Sing dollar lower. In fact, here’s what he had to say in the Pfennig, March 30th, “Another currency you may want to consider exiting is the Singapore dollar. According to a story I read on Bloomberg this morning, the Monetary Authority of Singapore may devalue their currency and allow it to drop 4 percent against the US dollar in the next few months.”
Well… Last night, the MAS announced a downward re-centering of the Sing dollar trading band while maintaining the width of the trading band and the policy of zero appreciation. OK… There it is… Forget all the trade widening and so on, and center on the “policy of zero appreciation”… That does not bode well for the Sing dollar… And for Chris’ statement on March 30th? Bang On! Timely!
The thing I can’t get out of head, is the fact that Singapore needs to keep its currency in line (value VS the dollar and euro) with the other currencies in Asia in order to keep its exports competitive… I guess, the MAS is thinking there aren’t going to be any exports! And the ones that are there, they (Singapore) will have a “cheaper currency” and an advantage!
At least the MAS didn’t devalue the currency, as these types of small countries tend to do to tilt the playing field toward them! And believe or don’t… The Sing dollar rallied on the news that the MAS didn’t devalue the currency… So… This is like manna from heaven for anyone trying to switch out of Sing dollars and into something else… The currency rallied overnight!