Strategist Who Forecast Singapore Surprise Sees More EasingAndrea Wong
Win Thin, who predicted in November that Singapore would need to ease monetary policy, says the central bank will act again after today’s surprise move to slow the pace of the currency’s appreciation.
The Monetary Authority of Singapore, which uses the exchange rate as its main policy tool, will cut its currency stance to neutral in April when the authority has a scheduled meeting, according to Thin, the global head of emerging-market strategy at Brown Brothers Harriman & Co.
“A modest appreciation is probably still too tight in this environment when everyone’s cutting, the meeting is now three months away, and we could see another move to zero appreciation,” Thin said in a phone interview from New York. “Emerging markets are having trouble getting a bid, and Singapore will be there as well. We’re still in the early days of selloff for the Singapore dollar.”
January isn’t even over yet and Singapore has become at least the ninth nation to ease policy to combat growing risks of deflation. Apart from seeking a slower currency appreciation, the MAS also cut the inflation forecast for 2015, predicting prices may fall as much as 0.5 percent.
The island’s dollar has already depreciated 8 percent in the past six months before today’s 1 percent slump to 1.3520 against the U.S. dollar, reaching the weakest since August 2010. The currency could weaken as much as 5 percent more to 1.42, Thin said.
Thin, 53, earned a Ph.D. in economics from Columbia University, specializing in developing countries.
Mitul Kotecha, head of Asia-Pacific currency strategy at Barclays Plc in Singapore, said the MAS will be on hold in April following today’s surprise. He had written in a report in October that the monetary authority will need to act after the Bank of Japan expanded its unprecedented monetary stimulus.
“It became more and more untenable to have a such a appreciation bias when you have such disinflationary forces and strong dollar environment in general,” Kotecha said by phone Wednesday. “If there was a bigger shift in policy, you’d see an even bigger reaction. I imagine they’d want to avoid such a shock in the market.”
The central bank guides the local dollar against a basket of currencies within an undisclosed band and adjusts the pace of appreciation or depreciation by changing the slope, width and center of the band. A flatter slope, which is now the central bank’s new policy, allows slower appreciation or depreciation over time.